^mmnm^M:'^.-'^'--: 


FIRE  INSURANCE  DEVELOPMENT 


ON  THE  PACIFIC  COAST 

BY 

HERBERT  H.  KIRSCHNER 


FIRE  INSURANCE  DEVELOPMENT 

ON  THE  PACIFIC  COAST 


BY 


Herbert  H.  Kirscliner 


'  > 


Published  By 

UNDERWRITERS'  REPORT 

San  Francisco 


^l'^u-^'- 


COPYRIGHT,    1922 

BY 

UNDERWRITERS'    REPORT 


FOREWORD 


IT  IS  doul)tful  whether  any  business  has  had  a  greater  inHiience  upon 
the  indiistrial  growth  of  the  Pacific  Coast,  and  San  Francisco  in  particular, 
than  that  of  fire  underwriting.  As  an  example:  Had  it  not  been  for  the 
insurance  indemnity  afforded  the  community  of  San  Francisco  at  the  time  of 
the  1906  conflagration,  the  great  metropolis  of  the  West  might  have  been 
wiped  out,  never  to  be  reconstructed.  From  the  ashes,  dust  and  ruins,  insur- 
ance restored  the  baker,  the  butcher  and  the  tailor.  Figuratively,  it  put  each 
and  every  line  of  endeavor  "on  its  feet"  again.  So,  over  the  entire  Pacific 
Coast,  the  extension  of  fire  coverage  has  been  the  business  savior  and  stabi- 
lizer. Inasmuch  as  fire  underwriting  has  been  so  prominently  interlinked 
with  the  history  of  the  West,  the  growth  of  fire  insurance  practices  on  the 
Pacific  Coast  has  been  flavored  with  that  color  and  picturesqueness  that  have 
marked  the  development  of  this  section  of  the  country.  "East  is  East,  and 
West  is  West,  and  ne'er  the  twain  shall  meet,"  said  Rudyard  Kipling,  world- 
renowned  author.  From  its  inception,  fire  underwriting  development  on  this 
Coast  has  been  distinctively  different  from  the  growth  of  the  business  in 
Eastern  centers.  Even  today  the  business  is  conducted  in  the  East — the 
Eastern  way;  in  the  West — the  Western  way.  Perhaps  Ijecause  "East  i> 
East,  and  West  is  West"  (although  Kipling  had  in  mind  the  Orient  and  the 
Occident).  The  foregoing  is  our  introduction  to  the  following  chapters 
devoted  to  the  history  of  fire  underwriting  on  the  Pacific  Coast. 


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FIRE  INSURANCE  DEVELOPMENT 


Chapter  I 

SEVENTY  YEARS  AGO 


IT  IS  known  that  conflagrations  will  drive 
companies  out  of  the  territory  in  which 
their  loss  ratios  are  boosted  considerably. 
But  a  conflagration  attracting  a  company,  that 
is  to  say.  to  cause  it  to  do  business  in  a  sec- 
tion, which  has  been  almost  completely  "wiped 
off  the.  map,"  is  a  rare  occasion. 

Primarily,  there  is  little  business  left.  But 
suppose  that  section  to  be  handicapped  with  a 
conflagration  hazard,  which,  although  the  sec- 
tion might  be  rebuilt,  and  offer  business  for 
insurance  companies,  would  make  likely  a 
repetition  of  disaster,  it  would  seem  unlikely 
that  company  officials  would  clamor  for  im- 
mediate entrance  into  that  section.  Yet  it  was 
the  result  of  a  conflagration  and  a  marked  fire 
hazard  that  brought  the  first  fire  insurance 
company  to  San  Francisco  and  the  Pacific 
Coast. 

Following  what  has  been  recorded  by  his- 
torians of  early  San  Francisco  as  the  conflagra- 
tion of  1851,  a  company  6000  nriles  away  from 
the  disaster  saw  through  the  smoke  the  possi- 
bilities of  conducting  a  profitable  insurance 
business  in  this  territory.  While  a  majority  of 
the  citizens  of  San  Francisco  who  were  left 
homeless  and  penniless,  as  the  result  of  the 
1851  fire,  despaired  at  the  outlook  for  the 
future,  in  London,  officials  of  the  Liverpool 
&  London  &  Globe  were  working  out  a  solu- 
tion, to  the  end  that  the  fire  menace  would  no 
longer  be  rooted  in  the  hearts  of  San  Francis- 
cans. Protection  against  fire  was  brought  to 
the  Pacific  Coast,  when  in  1852  the  English 
company  appointed  Joshua  P.  Haven  its  agent 
at  San  Francisco.  Thus,  Pacific  Coast  -'nsur- 
ance  history   began   seventy  years  ago. 

ALONE  IN  FIELD 

Mr.  Haven,  issuing  policies  for  the  Liver- 
pool &  London  &  Globe,  enjoyed  a  monopoly 
for  two  years.  Two  reasons  account  for  this. 
First  of  all,  San  Francisco  and  the  Pacific 
Coast    were    too    primitive    from    an    insurance 


company  standpoint.  It  must  be  remembered 
that  the  big  gold  excitement  in  California  did 
not  occur  until  1849.  This  was  a  milestone 
in  the  history  of  San  Francisco,  which  was 
then  known  as  Yerba  Buena,  for  from  that 
year  the  city  showed  visible  growth.  How- 
ever, in  1852  the  population  had  not  yet  reached 
a  degree  that  might  interest  insurance  com- 
panies. 

Secondly,  news  traveled  slowly  in  those  days. 
It  was  not  until  at  least  a  year  after  the 
establishment  of  the  Liverpool  &  London  & 
Globe  agency  at  San  Francisco  that  other 
companies  became  aware  of  the  fact.  Even 
then  it  was  regarded  as  either  gossip  or  idle 
hearsay.  The  American  companies  writing 
business  in  Eastern  centers  had  heard  tha^ 
what  San  Francisco  there  had  been  built  up 
prior  to  1851,  had  all  been  swept  away  by  the 
conflagration.  Since  the  foreign  companies 
had  not  as  much  information  about  the  con- 
flagration situation  as  the  American  companies, 
it  will  thus  be  readily  understood  why  four 
English  concerns  were  writing  fire  insurance  at 
San  Francisco  before  an  American  company 
entered  the  field. 

In  1854  the  Imperial  Fire,  Monarch  Fire 
and  the  Northern  Fire,  all  British  companies, 
established  an  agency  at  San  Francisco.  Falk- 
ner,  Bell  &  Co.  represented  the  Imperial  Fire, 
the  agency  for  the  Monarch  Fire  was  planted 
with  William  Lane  Booker,  and  Smith  Broth- 
ers represented  the  Northern  Fire.  Four  Eng- 
lish   companies   and   not  one   American. 

Gossip  developed  to  be  the  truth.  And  before 
the  year  1854  had  drawn  to  a  close  the  Con- 
tinental of  New  York  had  come  to  the  Pa- 
cific Coast,  and  appointed  Adolphe  Lowe  &  Co. 
its  agents  at  San  Francisco,  while  the  Home 
of  New  York  named  Case,  Heiser  &  Co.  its 
representatives.  The  year  1854  saw  fire  under- 
writing off  to  a   substantial   start. 


[Page  rive] 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  II 

EARLY  DAY  UNDERWRITING  DIFFICULTIES 


FROM  1854  to  1857  four  English  and  two 
American  fire  insurance  companies  had 
the  San  Francisco  field  exclusively  for 
themselves.  However,  this  should  not  be  taken 
to  indicate  that,  in  the  event  of  a  favorable  loss 
experience,  these  companies  were  enjoying  a 
healthy  premium  income.  On  the  contrary, 
fire  insurance  was  something  new  to  the  peo- 
ple of  the  West.  Furthermore,  with  the  ex- 
ception of  mercantile  risks,  there  were  but 
few  structures  worth  insuring.  Residences 
were  but  huts  or  hovels.  Redwood  was  the 
predominating   structural   material. 

Conducting  an  insurance  business,  in  the  far 
western  section  of  the  country  in  the  early 
fifties  was  a  difficult  task  as  far  as  keeping 
in  touch  with  the  home  office  was  concerned. 
In  fact,  early  records  show  that  it  was  a  rare 
company  that  knew  whether  it  was  "in  busi- 
ness" or  "out  of  business."  Then,  an  insurance 
agency  was  in  most  cases  a  side  issue  of  a  firm 
or  individual.  Instead  of  the  insurance  com- 
pany being  uppermost  in  the  minds  of  the 
agent,  his  interest  lay  more  directly  in  some 
everyday  trade  for,  as  is  required  of  the  pio- 
neers of  every  country,  there  was  considerable 
constructive  work  to  be  done.  A  condition,  in 
which  the  interests  of  the  insurance  companies 
were  but  secondary,  figured  prominently  in  re- 
tarding the  early  development  of  fire  under- 
writing in  this  section  of  the  country.  Espe- 
cially when  it  is  considered  that,  when  as  at 
the  present  time  a  company  can  get  in  touch 
with  its  agents  within  a  few  hours,  it  took 
several  months  to  reach  its  Pacific  Coast  rep- 
resentatives   in    1854. 

Agents  were  given  instructions  as  to  the 
sort  of  risks  to  write.  But  often  questions 
arose.  In  many  cases  property  owners  were 
delayed  two  and  three  months  in  their  quest 
for  insurance,  while  letters  from  the  San  Fran- 
cisco agent  traveled  by  pony  express  over  the 
plains  or  vessel  via  the  Isthmus  of  Panama  to 
New  York,  and  then  proceeded  on  the  slow 
return  journey.  There  were  a  few  cases  where 
the  building  was  destroyed  by  fire  before  the 
requested  information  reached  the  local  agent. 
The  mail  situation  resulted  in  "daily"  reports 
being  dispatched  monthly. 

FIRE  PROTECTION  POOR 

Lack  of  fire  protection  discouraged  other 
companies  from  extending  their  operations  to 
this  field.  In  fact,  there  was  almost  a  complete 
absence  of  fire-fighting  apparatus. 

The    "Adjuster,"    in    1898,    devoted    several 


pages  to  a  discussion  of  the  Pacific  Coast  un- 
derwriters early  day  hardships.  Regarding  the 
early  day  fire  protection  afforded  the  commu- 
nity of  San  Francisco,  the  "Adjuster"  stated, 
"The  fire  protection  was  composed  of  volun- 
teers, and  the  machinery  used  in  their  battles 
with  the  flames  was  of  the  crudest  and  most 
unsatisfactory  character.  The  men  were  rarely 
drilled,  and  the  science  of  fire-fighting,  as  we 
recognize  it  today,  was  undreamed  of.  Hand 
engines,  inadequate  water  supply  and  topog- 
raphy of  the  then  business  part  of  the  city, 
were  more  than  a  match  for  the  admitted  brav- 
ery and  energy  of  the  unorganized  forces  that 
were  hastily  summoned  to  resist  the  advance 
of  the  flames,  so  that  during  the  first  six  or 
eight  years  of  the  city's  history,  at  least  a 
half  dozen  serious  conflagrations  were  recorded 
in  which  fortunes  were  swept  away  and  very 
general  loss  sustained." 

In  other  words,  when  a  policy  was  written  by 
the  pioneer  companies  in  this  field,  it  was  more 
or  less  of  a  gamble  whether  or  not  the  risk 
would  be  destroyed  by  fire.  As  far  as  de- 
pending upon  the  volunteer  fire  department  for 
the  prevention  of  fire,  insurance  companies  in 
the  l)eginning  made  their  rates  without  regard 
to  the  fire-fighting  facilities.  This  condition 
of  fire  protection  existed  for  about  two  de- 
cades following  the  Liverpool  &  London  & 
Globe's  entrance  to  San  Francisco. 

FOUR  PIONEERS  STILL  LIVE 

Four  of  the  original  half  dozen  companies 
are  still  operating  in  the  Pacific.  Coast  terri- 
tory, which  is  highly  complimentary  to  the 
aggressiveness  and  stability  of  these  companies. 
The  Liverpool  &  London  &  Globe,  Northern 
Assurance,  Continental  and  Home,  of  the  six 
pioneers,  are  at  present  all  leaders  in  this  field. 
The  Monarch  and  Imperial  withdrew  many 
years  ago.  Of  the  first  six  San  Francisco  local 
agents,  no  traces  have  been  left— that  is  to 
say.  none  of  their  present-day  descendants  are 
conducting  the  agencies  which  they  estab- 
lished. 

It  will  be  concluded  from  the  above  chapter 
that  although  there  were  but  six  companies 
operating  at  this  city  from  1854  to  1857,  there 
was  not  enough  business  to  attract  others, 
while  what  risks  were  offered  would  probably 
be  passed  up  today  by  ordinary  underwriters. 
But  to  the  original  half  dozen  fell  the  task  of 
pioneering  the  field,  and  records  indicate  they 
did  nobly. 


[Page  Six] 


FIRE  INSURANCE  DEVELOPMENT 


Early    San    Francisco    conflagrations    as    reproduced    from    original    engravings    m    old    local    histories.     On 

the   left   is   a   view  illustrating   the   conflagration   of   June,    1851,    which    subsequently    led    to    the    establish- 

ment  of   an    insurance   agency   at  San    Francisco   by  the    Liverpool    &    London    &    Globe,    the    first    pioneer. 

Cuts  furnished   by  the  courtesy  of  the   Fireman's  Fund. 

Chapter  III 

MANY  LOCAL  COMPANIES    ORGANIZED 


BEFORE  the  curtain  had  rung  down  on 
the.  year  1857,  three  more  American  fire 
insurance  companies  turned  their  atten- 
tion westward.  It  was  that  year  that  the  Hart- 
ford, Phoenix  and  the  Merchants  of  New  York 
appointed  Edward  McLean  agent  at  San  Fran- 
cisco for  all  three  companies.  Shortly  after 
his  appointment,  McLean  formed  a  partner- 
ship with  John  Fowler  and  C.  T.  Hopkins. 
This  partnership  is  responsible  in  a  large 
measure  for  the  first  real  impetus  given  fire 
insurance  in  this  territory.  McLean,  Fowler 
&  Hopkins  determined  that  coverage  should 
be  extended  elsewhere  in  the  State  of  California, 
and  accordingly  named  various  sub-agencies 
at  the  more  populated  points.  This  subse- 
quently led  to  the  appointment  by  companies 
of  general  agents  at  San  Francisco,  and  the 
establishment  of  local  agency  plants  through- 
out the  Pacific  Coast.  The  early  day  agency 
plant  of  a  company  consisted  of  between  six 
and  twelve  agents,  for  there  were  few  Coast 
towns  of  large  enough  population  in  which 
an  insurance  company  could  write  business. 
It  should  also  be  noted  that  the  McLean, 
Fowler  &  Hopkins  combination  was  the  first 
to  represent  more  than  one  company. 

During  the  ten  years,  1857  to  1867,  there 
was  a  great  "rush"  of  Eastern  companies  to 
the  Pacific  Coast.  This  oncoming  was  sup- 
plemented by  the  organization  of  a  number 
of  local  companies.  No  other  ten-year  period 
in  the  history  of  Pacific  Coast  fire  underwrit- 
ing to  date  has  seen  as  many  fire  and  marine 
insurance  companies  organized  at  San  Fran- 
cisco   as    the    1857    to    1867    decade.      Twelve 


local  companies  commenced  operations  on  the 
Pacific  Coast  during  this  time. 

FIRST  LOCAL  COMPANY 

The  first  San  Francisco  fire  insurance  com- 
pany to  receive  its  charter  was  the  German 
Mutual  Fire.  Although  records  show  the  Ger- 
man Mutual  to  have  been  organized  in  June, 
1§S7,  it  did  not  really  begin  to  function  until 
early  in  1858.  As  ambitious  as  the  officers 
of  the  first  San  Francisco  company  were  to 
make  it  a  success,  its  business  career  was 
short.  Following  the  enactment  of  a  law 
requiring  of  all  incorporated  insurance  com- 
panies a  paid-up  capital  of  $100,000,  it  was 
decided  to  wind  up  the  affairs  of  the  German 
Mutual,  and  on  June  24,  1868,  the  company 
went    into    oblivion. 

Following  close  on  the  heels  of  the  German 
Mutual's  organization,  eleven  companies  sprung 
into  existence  before  the  first  local  company 
quit.  They  were:  The  California  Mutual  Ma- 
rine, California  Insurance  Company,  San  Fran- 
cisco Fire,  Fireman's  Fund,  Pacific  Insurance 
Company,  California  Home  Insurance  Com- 
pany, Home  Mutual,  Occidental  Insurance 
Company,  Union  Insurance  Company,  National 
Insurance  Company  and  the  People's  Insur- 
ance Company. 

TWO   COMPANIES   WEATHER  STORM 

In  the  year  of  this  writing,  1922,  but  two 
companies  of  the  first  twelve  are  flourishing. 
The  Fireman's  Fund  has  been  continuouslj^ 
in  business  since  May  3,  1863.  The  California 
Insurance  Company,  which  was  incorporated 
in     1861,    went    into    voluntary    liquidation    in 


[Page  Seven] 


FIRE  INSURANCE  DEVELOPMENT 


April,  1892,  but  thirteen  years  later,  in  June. 
1905,   reorganized   and  resumed   operations. 

Fire  underwriting  was  carried  on  crudely 
and  unscientifically  during  the  pioneer  period. 
From  records  available  of  the  fire  insurance  ac- 
tivities during  the  fifties  and  sixties,  there  ap- 
pear=  to  have  been  no  confusion,  but  the 
bufiness  was  conducted  on  a  plane  slightly 
higher  than  a  common  every-day  trade.  This 
was  due  to  the  many  obstacles.  As  has  been 
mentioned  in  the  preceding  chapter,  means 
of  communication  greatly  hindered  progress. 
Fire  underwriting  was  unlike  most  businesses, 
it  had  to  be  conducted  at  a  long  range.  This 
probably  accounts  for  the  large  number  of 
local  companies  which  were  organized.  These 
enjoyed  a  distinct  advantage  over  their  con- 
temporaries, inasmuch  as  they  were  "right  on 
the  spot"  of  their  operations. 

The  disadvantage  of  being  "two  months" 
away  from  the  home  office  is  reflected  in  the 
following  story,  which  has  been  handed  down 
and  appears  to  be  authentic: 


A  man  named  Curtis  L.  North,  upon  the 
departure  of  the  mail  ship  for  New  York  via 
the  Isthmus  of  Panama,  made  an  extensive 
drive  for  insurance  at  San  Francisco.  It  is 
stated  that  North,  posing  as  the  representa- 
tive for  the  United  States  Fire  of  New  York, 
accepted  any  and  all  risks,  and  cut  rates  so 
indiscriminately  that  his  competitors  suspected 
him  of  being  a  fraud.  However,  they  could 
prove  nothing.  Since  their  means  of  com- 
munication had  left  for  New  York  prior  to 
North's  drive,  they  were  obliged  to  content 
themselves  with  a  several  months'  wait  before 
they  could  ascertain  whether  North  was 
clothed  with  authority  by  his  company.  How- 
ever, the  United  States  Fire  representative  fled 
to  parts  unknown  ere  this  information  could 
be  received  from  the  East.  This  case  served 
as  a  future  warning  to  the  property  owner, 
and  only  agents  of  known  integrity  were 
patronized.  It  is  said  that  the  North  instance 
was  the  only  time  that  dishonest  practice  was 
so  prominently  brought  into  the  fire  insurance 
business   on   the   Pacific   Coast. 


Fire  protection   as  afforded  the   community  of  San    Francisco   about   1860,    and   for   many   years   afterward, 
is   well    pictured    in    the    above    reproduction    from    an    original     engraving.       Almost    the    entire    volunteer 
fire-fighting   force   was   summoned    at  the   outbreak   of  a   blaze.     Twenty-seven   men  are  here  seen   answer- 
ing   an    alarm.      Cut  furnished    by    courtesy    of    the    Fireman's    Fund 


[Page  night \ 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  IV 

CLIMB  TOO  HARD  FOR  COAST  COMPANIES 


WITH  the  exception  of  the  Fireman's  Fund, 
the  twelve  local  insurance  companies, 
which  were  organizedi  during  the  period 
1857  to  1867,  found  the  struggle  for  existence 
considerably  harder  than  they  had  anticipated. 
Nine  did  not  live  longer  than  eleven  years, 
and  several  of  them  were  forced  to  retire  at 
the  age  of  one,  two,  three  and  four  years,  re- 
spectively. The  Union  Insurance  Company, 
which  was  organized  at  San  Francisco  in  April, 
1865,  flourished  for  twenty-six  years,  alter  which 
it  was  bought  by  the  Alliance  Assurance  Com- 
pany. Although  the  California  re-insured  its 
business  with  the  Fireman's  Fund  in  April  1892, 
after  twenty-nine  years  of  fire  insurance  opera- 
tions in  the  Pacific  Coast  field,  as  stated  in  the 
preceding  chapter,  the  company  re-organized  in 
June,   1905. 

Because  some  of  the  early  San  Francisco  fire  in- 
surance companies  were  too  ambitious  they  fell  by 
the  wayside.  In  many  cases,  shortly  after  their  or- 
ganization they  extended  their  operations  to 
Eastern  fields.  Had  not  the  great  conflagration 
occurred  at  Chicago  in  1871,  four  of  the  first 
twelve  companies  organized  at  San  Francisco 
might  still  be  in  business.  One  company,  the 
Builders',  suffered  a  peculiar  fate,  a  fate,  which, 
however,  became  more  common  at  a  later  date. 
It  was  organized  in  September,  1886,  and  placed 
into  the  hands  of  the  receiver  two  years  later 
when  the  president  and  promoter,  Thomas 
Mooney.  disappeared  with  the  company's  funds. 

CONTINUE   TO  ORGANIZE 

The  disastrous  experience  of  the  pioneer  Cali- 
fornia companies  did  not  discourage  the  organiza- 
tion of  more  fire  insurance  companies  in  this 
State.  It  will  be  noted  that  few  charters  were 
taken  out  during  the  twenty  years  following 
1867.  Ten  companies  saw  the  first  light  of  day 
during  the  two  decades.  None  enjoyed  a  long 
life. 

Other  California  cities  having  attained  a  popu- 
lation large  enough  to  interest  insurance  com- 
panies, four  of  the  "home"  concerns,  which  came 
into  existence  during  the  period  1868  to  1888, 
established  their  head  offices  in  cities  outside  of 
San  Francisco.  The  Alameda  County  Fire  Insur- 
ance Company  was  the  first  California  underwrit- 
ing institution  to  perfect  its  organization  else- 
where than  San  Francisco.  It  was  in  July,  1874, 
that  the  company  was  organized  at  Oakland.  Six 
years  later  the  Oakland  Home  Insurance  Com- 
pany was  also  formed  at  that  city.  In  May,  1885. 
the  Southern  California  of  Los  Angeles  secured 


its  charter.  Stockton  was  chosen  as  the  home 
office  headquarters  for  the  Alta  Fire  in  Septem- 
ber, 1888.  The  companies,  which  were  incor- 
porated at  San  Francisco  during  the  two  decades. 
1868  to  1888,  were :  The  State  Investment  and 
Insurance  Company,  Commercial  Insurance  Com- 
pany, California  Farmers'  Mutual,  Western  Fire 
&  Marine,  Sun  Insurance  Company  and  the  Anglo 
Nevada  Insurance  Company. 

NORTHWEST  ASSUMES  IMPORTANCE 

While  the  population  of  California  was  in- 
creasing during  the  eighties,  the  Northwest  was 
also  assuming  importance  as  an  insurance  cen- 
ter. But  as  a  breeding  ground  for  fire  insurance 
institutions,  that  section  of  the  Pacific  Coast 
proved  disastrous  for  backers  of  the  would-be 
companies.  Seattle,  Spokane,  Portland,  Salem 
and  Tacoma  were  selected  as  headquarters  by 
fifteen  companies,  all  of  which,  however,  op- 
erated but  a  short  time. 

The  Northwest  fire  insurance  companies,  which 
had  not  passed  out  of  their  infant  stage  before 
they  were  obliged  to  seek  a  graveyard,  were : 
Organized  at  Seattle — The  Home,  Farmers',  Se- 
attle and  the  Cascade ;  organized  at  Spokane — 
The  Security  and  the  Washington  Farmer;  or- 
ganized at  Portland — The  NortBwest  Fire  &  Ma- 
rine, Oregon  Fire  &  Marine  and  the  Pacific  Fire; 
organized  at  Salem — The  State ;  organized  at 
Tacoma — The  North  Pacific,  West  Coast  and 
the  Tacoma  Guarantee. 

On  December  31,  1888,  there  were  104  insur- 
ance companies  transacting  a  fire  insurance  busi- 
ness in  California.  Of  this  number  eleven  com- 
panies had  been  incorporated  in  this  State,  sixty- 
seven  were  of  other  States  and  twenty-six  were 
foreign.  Fifty-one  of  the  fire  insurance  com- 
panies, which  were  operating  in  California  dur- 
ing 1888,  are  still  writing  insurance  here,  the 
fifty-three  remaining  either  discontinued  busi- 
ness or  withdrew  from  this  territory  during  the 
ensuing  years. 

STAND   TEST  OF  TIME 

The  companies  which  have  stood  the  test  of 
time,  emerging  through  the  tria's  and  tribula- 
tions, are:;  California  companies — The  California 
and  the  Fireman's  Fund;  incorporated  in  other 
States — Aetna,  Agricultural,  American,  American 
Central,  Citizens,  Concordia,  Connecticut,  Con- 
tinental, Fire  Association,  Firemen's,  Franklin. 
Great  American,  Girard  F.  &  M.,  Glens  Falls, 
Granite  State,  Hanoyer,  Hartford,  Home,  Insur- 
ance   Company    of    North    America,    Insurance 


[Page  Nine] 


FIRE  INSURANCE  DEVELOPMENT 


HOME  OFFICE  OF  THE   ALTA  FIRE   OF  STOCKTON,  CALIF. 

Organized    in    May,    1888,    the    only    company    organized    at   Stocl<ton,    was   obliged    to    re-insure    and    retire 

a   little  over  four  years   later.     At  the  extreme   left  appears    Chas.    W.    Dohrmann,    manager   at   the    home 

office.     M.    D.   Baker,  who  was  the  secretary  of  the  company,   is  seen   standing   next  to   Dohrmann 


Company  of  Pennsylvania,  Mechanics  &  Traders, 
Michigan  F.  &  M..  National,  New  Hampshire, 
Niagara,  Orient,  Pacific  Fire,  Pennsylvania. 
Providence-Washington,  Security,  Springfield 
F.  &  M.,  St.  Paul,  United  States  and  the  West- 
chester; foreign  companies — Atlas,  Commercial 
Union,  Liverpool  &  London  &  Globe,  London 
Assurance,  London  &  Lancashire,  New  Zealand, 
North  British  &  Mercantile,  Northern,  Nor- 
wich LTnion,  Phoenix,  Queen,  Royal  Scottish 
Union  &  National.  Sun,  and  the  Svea. 


The  extent  to  which  the  fire  insurance  busi- 
ness had  grown  from  its  early  beginning  in 
California  at  the  time  considered  in  this  chapter 
is  shown  in  the  annual  report  of  Insurance 
Commissioner  J.  C.  L.  Wadsworth  for  the 
year  ending  December  31,  1888.  Risks  valued 
at  $352,831,786  had  been  covered  against  fire, 
netting  a  premium  income  of  $6,087,041.  Losses 
paid  that  year  totaled  $3,049,030,  showing  a 
loss  ratio  of  50  per  cent. 


[Page  Ten] 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  V 

FIRE  INSURANCE  PRACTICES  REGULATED 


THE  business  of  fire  insurance  I)ccause  of 
its  technical  nature  can  not  be  conducted 
without  rules,  rates  and  regulations.  This 
was  clearly  illustrated  by  the  early  action  of 
the  pioneer  fire  insurance  companies  in  uniting 
for  a  common  cause.  Five  years  after  fire  cov- 
erage had  been  extended  to  the  Pacific  Coast 
an  organization  known  as  the  Board  of  Fire 
Insurance  was  formed.  This  was  in  the  year 
1857.  Since  San  Francisco  hud  been  the  only 
city  wherein  companies  had  appointed  agents, 
the  first  fire  insurance  rating  organization  was 
more  of  a  local  board  than  that  of  a  company 
association. 

Members  were  enrolled  under  individual  or 
firm  names.  The  following  nine  comprised  the 
first  Board:  C.  Adoiph  Lowe,  E.  W.  Croweli, 
Jonathan  Hunt,  Joshua  P.  Haven,  McKinley. 
Garrios  &  Co.,  Falkner,  Bell  &  Co.,  William 
Lane  Booker,  Smith  Bros.  Sc  Co.,  and  Dickson 
De  Wolf  &  Co.  The  first  president  of  the 
Board  of  Fire  Insurance  was  E.  R.  Falkner. 
and  Joshua  P.  Haven  was  the  first  secretary. 
These  agents  represented  the  following  com- 
panies during  1857,  the  organization  year: 
Continental,  Phenix  of  Brooklyn,  Home,  Ni- 
agara, Washington,  Park,  Liverpool  &  London 
(Globe  was  added  to  the  name  of  the  company 
at  a  latter  date),  Royal,  Imperial,  Monarch, 
Northern  and  the  Unity. 

PROMULGATED  RATES 

The  principal  function  of  the  Board  of  Fire 
Insurance  was  to  promulgate  rates  for  the  limi- 
ted territory,  which  was  exploited  by  the 
pioneer  companies.  Its  life  was  short,  and  in 
January,  1861,  was  succeeded  by  a  stronger 
organization  known  as  the  San  Francisco 
Board  of  Underwriters.  William  Lane  Booker, 
vvho  represented  the  Monarch,  was  elected  the 
first  president  of  the  second  Board.  He  was 
h-ghly  efiicient,  and  wras  exceptionally  well 
liked  by  the  insurance  fraternity,  which  ac- 
counts for  h's  serving  as  president  for  the  en- 
suing ten  years.  He  was  succeeded  in  this 
capacity  by  David  J.  Staples,  who  was  at  that 
time    president    of    the    Fireman's    Fund. 

The  activities  of  the  San  Francisco  Board 
of  Fire  Underwriters  were  not  confined  to  the 
making  of  tariffs  and  schedules.  Members  of 
the  Board  also  interested  themselves  in  legis- 
lative and  fire  prevention  work.  At  the  re- 
quest of  the  San  Francisco  Board  of  Fire  Un- 
derwriters, the  California  Legislature  created 
the  office  of  Fire  Marshal  at  San  Francisco,  and 


empowered  the  Board  to  nominate  and  elect 
the  man  for  this  office.  Incidentally  the  insur- 
ance  coiTipanies   paid   his   salary. 

With  the  expansion  of  the  territory  of  the 
agents,  who  made  their  headquarters  at  San 
Francisco,  the  Board  extended  its  rate-making 
activities.  However,  the  business  of  fire  insur- 
ance companies  operating  on  the  Pacific  Coast 
grew  so  quickly,  that  it  was  found  necessary 
in  March,  1870,  to  reorganize.  The  name  was 
also  changed  to  the  Board  of  Underwriters  of 
San  Francisco. 

BIG  AND  LITTLE  BOARDS 

Every  San  Francisco  agent  did  not  become  a 
member  of  the  "big  Board,"  as  it  was  called. 
There  were  a  few  outsiders.  But  even  these 
outs'ders  appreciated  the  fact  that  their  fate 
was  dependent  upon,  at  least,  some  co-opera- 
tion. So  they  too  made  agreements,  and  had 
understandings.  They  were  known  as  the 
"little    Board." 

In  May.  1884,  the  "big"  and  "little"  Boards 
disbanded,  and  the  Pacific  Insurance  Union 
was  organized.  The  following  announcement 
clearly  describes  the  fire  insurance  organiza- 
tion, wh''ch  many  present  day  underwriters  will 
remember,  for  the  Pacific  Insurance  LTnion  con- 
tinued until  February,  1895. 

PACIFIC  INSURANCE  UNION 
401    California   street, 
San   Francisco,  December  31,   1885. 

To  THE  Fire  Insurance  Agents 
IN  Idaho  and  Utah: 

Gentlemen:  In  accordance  with  resolution 
of  the  executive  committee,  I  hereby  notify 
you  that  the  rules  and  regulations  of  the  "Pa- 
c'fic  Insurance  Union"  will  be  enforced  in  your 
territory  on  and  after  January  15,   1886. 

The  Pacific  Insurance  Union  is  an  associa- 
tion of  officers  and  managers  combined  for  the 
purpose  of  arresting  the  progress  of  demor- 
alization, and  placing  the  business  on  firmer 
ground.  For  the  purpose  of  effecting  this  "The 
Union"  (of  Chicago)  has  agreed  to  subject  all 
its  members  to  the  provisions  of  the  consti- 
tut'on  and  by-laws  of  this  Union. 

These  provisions,  briefly  stated,  are  as  fol- 
lows: 

First:  To  require  all  agents  to  join  local 
unions  as  soon  as  formed. 

Second:  Not  to  allow  any  insurance  to  be 
granted  at  less  than  such  rates,  nor  in  a  dif- 
ferent manner  to  that  prescribed  in  such  rules 
as   may  be   promulgated. 


[Page  Eleven] 


FIRE  INSURANCE  DEVELOPMENT 


PIONEER   CALIFORNIA    LOCAL  AGENTS 

''T'tr  11*"  whose  likenesses  appear  above  were  prominently  Identified  with  the  San  Francisco  local  agency 
of  Falkner-Bell  &  Co.,  which  was  organized  in  the  early  fifties.  The  firm  was  later  succeeded  by  the 
Catton,  Bell  &  Co.  general  agency.  From  left  to  right:  John  A.  Jones,  manager  for  the  fire  depart- 
ment; James  E.  Bell,  son  of  one  of  the  founders  of  the  firm;  Kenneth  Catton,  one  of  the  managers  of 
the  concern;  Louis  Mel,  adjuster  for  the  fire  insurance  companies  represented  by  the  agency,  and  Don- 
ald  F.   Tillinghast,  cashier. 


Third:  Not  to  allow  the  cancellation  of  any 
policy  in  any  other  form  than  that  prescribed 
by  the  condition  of  such   policy. 

Fourth:  Not  to  allow  the  payment  of  any 
brokerage  or  rebate  on  any  bus'ness  placed  or 
written,  except  to  members  of  the  Unions  above 
named,  their  agents,  solicitors  or  brokers. 

Fifth :  Not  to  allow  the  payment  of  more 
than  15  per  cent  commission  as  brokerage  on 
Inisiness  placed. 

Sixth:  Not  to  pay  any  country  agent  more 
than  IS  per  cent  as  agency  comm'ssion  (save  on 
growing  grain  and  grain  in  warehouse  on  which 
agency  commission  must  not  exceed  20  per 
cent). 

Seventh:  Not  to  allow  any  insurance  to  be 
placed  with  any  company  not  represented  in 
this  Union,  nor  to  allow  any  insurance  to  be 
accepted  from  agents  of  companies  not  mem- 
bers of  the  Union. 

Local  LTnions  will  be  formed  as  rapidly  as 
possible  by  the  s'gning  of  agreements  by  all 
the  local  agents  of  each  district,  and  special 
rates  will  be  made  as  soon  as  possible  on  all 
the  business  risks  of  your  town. 

Until  such  special  rates  are  made,  the  rates 
and  rules  prescribed  in  Book  of  Rates  No.  4, 
will  be  the  rates  and  rules  of  this  Union  in  your 
agency  territory,  subject  to  such  changes  as 
may  be  promulgated  by  the  executive  com- 
mittee and  general  manager. 

The    tariff    rates    made    bv    the    "Idaho    and 


Montana  Underwriters  Association"  are  hereby 
abrogated. 

To  avoid  some  of  the  annoyances  incident  to 
the  establishment  of  the  system  of  supervision 
of  risks  in  this  office,  agents  are  requested  to 
make  careful  diagrams  and  descriptions  of 
premises  insured  and  their  exposures,  when  not 
accurately  described  on  Sanborn  map.  Reports 
of  renewals  of  old  business  should  have  new 
diagrams   attached. 

All  applications  and  daily  reports  of  risks 
taken  or  renewed,  accounts  current,  reports  of 
endorsement  and  written  evidences  of  return 
premiums  relating  to  business  which  you  write 
for  principals  in  St.  Paul,  Chicago  or  other 
Eastern  cities,  must  be  forwarded  to  them  in 
envelopes  properly  addressed,  enclosed  in  cover 
address  "Pacific  Insurance  Union,  Salt  Lake 
City,  Utah." 

Remittances,  however,  should  be  sent  direct, 
and  not  through  the  union  office. 

Reports  of  business  to  Pacific  Coast  man- 
agers must  be  forwarded  direct  to  them,  to  be 
by  them  delivered  to  the  office  of  the  Union 
in  San  Francisco. 

Sub-agents  reporting  to  general  agents  in 
Montana,  Idaho  or  Utah  can  continue  to  send 
their  papers  direct  to  such  general  agents,  who 
must  forward  same  to  proper  office  for  ap- 
proval. 

Yours  truly, 

Alfred  Stillman,  General  Manager. 


[Page  Twelve] 


FIRE  liXSURANCE  DEVELOPMENT 


Chapter  VI 

A  DECADE  WITH  THE  PACIFIC  INSURANCE  UNION 


ALMOST  clev^en  years  was  the  span  of 
life  of  the  Pacific  Insurance  Union,  but 
the  latter  period  of  its  existence  was 
marked  by  a  greater  flurry  and  excitement  in 
fire  insurance  than  has  been  witnessed  since 
that  time. 

When  the  "big"  and  "little"  Boards  dis- 
banded in  1884,  and  the  members  thereof 
joined  to  form  the  Pacific  Insurance  Union, 
the  new  body  was,  by  no  means,  a  strong 
organization,  as  will  be  seen  in  the  following 
account  of  the  early  trials  and  tribulations  of 
the  organization.  In  the  late  spring  of  1884 
the  union  began  to  function  officially  with  the 
establishment  of  an  office  in  the  old  Home 
Mutual  building  on  Sansome  street,  between 
Pine  and  California. 

The  membership  was  composed  of  individ- 
uals and  firms,  companies  having  no  direct 
interest  in  the  organization.  At  one  time  every 
company  representative  was  a  member  of  the 
Union.  In  January,  1885,  half  a  year  after 
the  organization  had  been  formed,  the  mem- 
bership was  comprised  of  the  following:  Hop- 
kins &  Bromwell,  Hutchinson  &  Mann,  Geo. 
C.  Boardman,  J.  F.  Houghton,  Chas.  R.  Story, 
Hugh  Craig,  William  J.  Landers,  Smith,  Snow 
&  Moody.  A.  P.  Flint,  C.  F.  Mullins,  Tom  C. 
Grant.  W.  J.  Callingham,  Jacobs  &  Easton, 
Brown,  Craig  &  Co.,  John  H.  Wise,  Chas. 
A.  Laton.  Robert  Dickson.  J.  A.  Jones,  Butler 
&  Haldan.  C.  L.  Taylor,  E.  E.  Potter.  Jos.  C. 
Jennings  &  Co.,  Chas.  D.  Haven,  D.  J.  Staples, 
William  J.  Dutton,  Walter  Speyer,  William 
P.  Jones,  William  F.  Blood,  George  D.  Dornin, 
Gutte  &  Frank,  Speyer  &  Herold,  Gustave 
Touchard.  James  D.  Bailey,  Harry  W^.  Syz, 
George  W.  Spencer.  P.  J.  White,  R.  G.  Brush, 
A.  J.  Bryant,  Chas.  H.  Gushing,  Cesar 
Bertheau,  William  Macdonald,  Franz  Jacoby 
&  Co.,  Hagan,  Manheim  &  Co.,  Jonathan  Hunt 
Sons  &  Co.,  Oliver  Hawes,  H.  M.  Newhall  & 
Co..  J.  M.  Philip,  and  D.  L.  Beck  &  Sons. 

Chas.  R.  Story  was  president  of  the  Union, 
A.  E.  Magill,  vice-president,  and  Chas.  D.  Haven 
served  as   secretary. 

UNIMPORTANT  FACTOR 

The  Pacific  Insurance  Union,  unlike  the  Pa- 
cific Board,  which  represents  organized  fire  in- 
surance today,  was  not  a  very  important  fac- 
tor in  the  Pacific  Coast  fire  underwriting  v/orld 
at  its  outset.  The  office  of  the  Union  was  a 
small  room,  in  which  was  one  desk.    The  actual 


work  of  conducting  the  organization  was  di- 
vided between  Alfred  Stillman,  general  man- 
ager, E.  F.  Mohrhardt,  his  assistant,  and  Chas. 
M.  Nichols,  surveyor. 

Although  such  an  organization  as  the  Pacific 
Insurance  LInion  -was  deemed  necessary  to  the 
good  and  welfare  of  Pacific  Coast  fire  unier- 
writing,  members  did  not  take  it  very  seri- 
ously at  first.  It  is  related  that  often  when  a 
representative  told  a  clerk  in  an  office  that  he 
came  from  the  Union,  the  latter  was  puzzled, 
and  declared  that  he  knew  of  no  organisation 
bearing  this  name.  Collecting  assessments 
from  many  of  the  members  was  a  difficult  task 
during  the  early  years  of  the  Union.  How- 
ever, as  the  fire  underwriting  organization 
grew  in  activity,  this  indifference  disappeared. 

Montana,  Idaho  and  Utah  were  taken  into 
the  jurisdiction  of  the  Pacific  Insurance  Union 
in  January,  1886,  as  district  C,  a  branch  office 
being  opened  at  Salt  Lake  to  care  for  this  ter- 
ritory. Oregon  and  Washington  were  included 
in  the  latter  part  of  1887,  the  Union  then  cover- 
ing all  of  the  eight  Pacific  Coast  States  Head- 
quarters of  the  organization  were  always  main- 
tained at  San  Francisco. 

As  stated  in  the  preceding  chapter,  the  princi- 
pal functions  of  the  Pacific  Insurance  Union 
were  promulgating  rates,  and  regulating  com- 
missions. With  each  succeeding  year  follow- 
ing its  organization  the  Union  gained  in  pres- 
tige. Although  there  was  squabbling  and 
fighting  at  times,  which  was  to  be  expected  in 
an  organization  of  this  kind,  it  appeared  as 
though  the  Union  was  to  take  a  permanent 
place  in  Pacific  Coast  fire  underwriting  affairs. 
In  1892  it  was  threatened  for  a  short  time  with 
disruption,  when  the  Home  of  New  York, 
Phoenix  of  Hartford,  Continental  and  the 
Northwestern  National  representatives  resigned 
from  membership.  All  four  companies  were 
conducting  a  large  business  in  this  territory, 
and  it  was  feared  that  others  might  follow  suit. 
However,  matters  were  adjusted,  and  dissolu- 
tion was  prevented. 

COMPETITION  KEEN 

During  this  period  of  Pacific  Coast  fire  un- 
derwriting, companies  were  allowed  to  have 
agents  at  San  Francisco  as  elsewhere.  They 
also  employed  men  who  were  known  as  so- 
licitors. With  the  coming  to  the  Coast  of  many 
more  companies  each  year,  competition  for 
business  grew  keener,  and  general  agents  and 
managers  cast  their  eyes  about  for  the  agents 


[Fayc  Thirteen] 


FIRE  INSURANCE  DEVELOPMENT 


who  controlled  the  most  business,  and  the  so- 
licitors who  were  the  best  hustlers.  In  their 
eagerness  to  secure  volume,  company  managers 
sometimes  overlooked  Union  rules.  Early  in 
1894  it  came  to  the  attention  of  those  man- 
agers who  were  living  up  to  their  agreem.ents, 
as  members  of  the  Union,  that  excess  commis- 
sions were  being  paid  to  San  Francisco  agents 
and  solicitors  by  some  of  the  managers.  This 
practice  grew,  and  before  many  months  had 
passed,    each    manager    was    suspicious    of    the 


other  and  in  self-defense  did  not  hesitate 
to  violate  rules  and  regulations.  .Then  rates  were 
cut.  and  rebating  took  on  large  proporrions. 

The  situation  was  growing  hopeless  da}"  by 
day.  Efforts  to  come  to  an  understanding 
were  fruitless.  A  break  was  evident.  During 
1894  twenty  companies  either  withdrew  from 
the  Union  or  gave  notice  that  they  would  soon 
retire.  And,  subsequently,  in  February,  1895, 
the   Pacific   Insurance  Union  breathed  its   last. 


Pacific  Insurance  Union. 


General  manager-s  Office. 

401    CALIFORNIA    STREET. 


)Zycx.M^  ^1 


-J  J^^e-c-t-KM.'Z^,^  ^J,   JSS^. 


M  G  Fire  ilnsurance Agents  in  the  Terrilori^  of  DytGnlaria: 


'^Q^it^LJL-i^i^  : 


ANNOUNCING   THE    PACIFIC    INSURANCE    UNION 

Whenever   the    Pacific    Insurance    Union    extended    Its  jurisdiction,  a   notice  was  sent  out  to  agents  in  the 

new    territory.     The    above    is    a    reproduction    of   part  of  a  notice  sent  to  agents  in  the  "Territory  of  IVIon- 

tana."     The     notice     is     not     handwritten,     as     it     appears  to  be,  but  is  printed  in  a  peculiar  style  of  type, 

used    frequently    in    the    iate    eighties.     Notice   is  reproduced  by  courtesy  of  E.  F.   Mohrhardt 


{Page  Fourteen] 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  VII 

THE  RATE  WAR    OF  1895  AND  1896 


TWO  years  of  bitter  warfare  between  Pa- 
cific Coast  fire  underwr'ters  had  begun. 
The  hatred,  which  was  raised,  is  evidenced 
in  a  report  of  an  early  contemporary  to  the  fol- 
lowing effect:  "San  Francisco  was  from  the 
outset  a  common  battleground,  and  in  this 
field  was  never  even  a  truce  called  to  bury 
the    dead." 

As  was  stated  in  the  preceding  chapter,  pay- 
ment of  excess  commissions,  rate  cutting  and 
rebating  resulted  in  the  dissolution  of  the  Pa- 
c'fic  Insurance  Union.  Immediately  thereafter 
the  Board  of  Fire  Underwriters  of  the  Pacific 
was  organized.  This  was  in  February,  1895. 
The  president  of  the  Board,  George  W. 
Spencer,  dispatched  telegrams  to  local  agents 
in  the  principal  cities  and  towns  on  the  Pa- 
cific Coast  notifying  them  to  continue  to  ob- 
serve the  rates  issued  by  the  Pacific  Union. 

MEMBERS  OF  BOARD 

Unlike  previous  organ'zations,  the  Pacific 
Board  included  companies  among  its  member- 
sh'p  and  not  general  agents  or  managers.  The 
following  companies  were  the  charter  members 
of  the  Board:  Aachen  &  Munich,  Aetna,  Agri- 
cultural, Alliance  of  London,  American  Cen- 
tral, American  of  New  York,  American  of 
Ph'ladelphia,  American  of  Newark,  Atlas,  Bal- 
oise,  British  America,  Broadway,  Caledonian, 
Commercial  Union  Assurance,  Connecticut, 
Delaware,  Fire  Association,  Fireman's  Fund, 
Fireman's  of  Baltimore,  German  American, 
Germana,  Glens  Falls,  Girard,  Greenwich, 
Hamburg-Bremen,  Hanover,  Hartford,  Hel- 
vetia Swiss,  Home  of  Utah,  Home  Mutual,  Im- 
perial, Insurance  Company  of  North  America, 
Insurance  Company  of  Pennsylvania,  Lanca- 
shire, Lion,  Liverpool  &  London  &  Globe,  Lon- 
don &  Lancashire,  London  Assurance,  Mag- 
deburg, Manchester,  Merchants'  of  New  Jersey, 
Milwaukee  Mechanics,  National,  New  Zea- 
land, New  York  Underwriters,  Niagara, 
North  British  &  Mercantile,  North  Ger- 
man, Northern  Assurance,  Northwest  F.  & 
M.,  Norwich  Union,  Orient,  Pacific,  Pala- 
tine, Patr'otic,  Pennsylvania,  Phenix  of 
Brooklyn,  Phoenix  of  London,  Prussian  Na- 
tional, Providence-Washington,  Queen,  Rhode 
Island  Underwriters,  Royal  Exchange,  Royal, 
Scottish  Union  &  National,  Springfield,  St. 
Paul,  Sun  of  Calif orn'a.  Sun  of  London,  Svea, 
Teutonia,  Traders',  Transatlantic,  Union  of 
Philadelphia,    Union   of   London,   United    Fire- 


men's, United  States  Fire,  Westchester  and 
the  Western. 

Eighty-one  companies  out  of  the  110  licensed 
by  the  State  were  members  of  the  Pacific 
Board  when  it  took  over  the  activit'es  of  the 
Pacific  Union.  Twenty-nine  companies  were 
outlaws.  However,  during  the  rate  war  of 
1895-96,  the  original  number  was  cut  down  by 
degrees.  The  Board  during  these  years  was 
not  a  stable  organization.  Two  months  after 
it  had  been  formed,  four  companies  resigned 
from  membership.  After  that,  resignations 
were  common  occurrences. 

Several  of  the  non-Board  companies,  whch 
were  particularly  strong,  were  always  a  jump 
or  two  ahead  of  their  competitors  in  the  Board. 
The  former  would  invade  a  town,  cut  the  rate 
on  every  building  in  town,  pay  excess  com- 
miss'ons  and  rebate  to  such  an  extent  that 
before  the  Board  membership  was  aware  of 
this  procedure,  "the  town  had  gone  non- 
Board."  Then  Alfred  Stillman.  who  was  chair- 
man of  the  executive  committee,  would  notify 
Board  agents,  in  the  town  invaded,  that  Board 
rates  were  suspended.  However,  the  non- 
Board  compan'es  had,  by  this  time,  made  their 
clean-up,  and  with  rates  suspended,  what  busi- 
ness remained  was  fought  for  by  the  Board 
companies. 

Suspension  of  rates  spread  like  wildfire.  In 
a  little  over  a  half  a  month  the  State  of  Cali- 
fornia was  thrown  wide  open.  It  is  interesting 
to  note  how  fast  the  rate  war  progressed.  The 
first  "ultimatum"  was  sent  out  by  the  Pacific 
Board  on  March  28,  1895,  as  follows: 

"Resolved,  That  rates  in  Alameda  county  be 
suspended  from  today  noon." 

On  April  2d: 

"Resolved,  "That  rates  in  San  Jose  and  within 
a  radius  of  five  miles  from  the  city  hall  be 
suspended  from  today  noon  *  *  *." 

On  April  4th: 

"Resolved,  That  all  rates  in  Pasadena  be 
suspended  from  today  noon." 

"Resolved,  That  rates  in  Grass  Valley  be 
reduced  25  per  cent  from  today  noon  *  *  *." 

Also  on  the  same  day  agents  at  Missoula, 
Mont.,  were  informed  of  the  following  reso- 
lution adopted  by  the  executive  committee  of 
the  Pacific  Board: 

"Resolved,  That  agents  be  permitted  to  re- 
write their  own  risks  at  any  rate  of  premium 
wth   the   non-cancellation    clause   attached.     It 


'_  Page  Fifteen  ] 


FIRE  INSURANCE  DEVELOPMENT 


being  understood  that  this  permission  does  not 
extend  to  the  policies  of  any  other  Board  com- 
panies, but  does  permit  the  writing  of  new 
business." 

From  the  above  resolution  it  will  be  noted 
that  members  of  the  Board  were  allowed  to 
cut  rates  in  competition  with  each  other  for 
new  business. 

The  first  large  disturbance  came  w'th  the 
Board  notice  of  April  5th.  It  was  announced 
that  rates  in  Los  Angeles,  except  on  specal 
hazards  that  were  rated  at  2  per  cent  or  over, 
would  be  suspended  the  next  day.  It  was 
deemed  mere  folly  to  carry  on  this  rate  sus- 
pension program  town  by  town,  so  on  April 
16,  1895,  at  a  general  meeting  of  the  Board,  the 
following  resolution  was  adopted: 

"Resolved,  That  it  is  the  sense  of  this  meet- 
ing that  all  rules  and  rates  in  the  State  of  Cali- 
fornia be  suspended  on  and  after  the  20th  inst., 
excepting  in  places  where  the  situation  is  con- 
trolled by  local  Boards,  or  local  agency  agree- 
ments, and  that  members  be  permitted  to  so 
notify  their  agents."    This  was  the  first  climax. 

Rates  were  reduced  20  per  cent,  except  on 
special  hazards  rating  2^^  per  cent  or  over,  in 
the  following  Pacific  Coast  cities  and  towns  on 
April  19th,  which  became  known  as  "the  grand 
slaughter  day:"  Oregon — Portland  (rates 
were  restored  on  April  25th),  Albany,  Salem, 
Corvallis,  Eugene,  Roseburg,  Ashland,  Pendle- 
ton, The  Dalles;  Washington  —  Seattle,  Ta- 
coma,  Olympia,  Walla  Walla,  Spokane,  Port 
Townsend;  Montana  —  Helena,  Butte,  Great 
Falls,  Bozeman,  Anaconda. 

Never  in  the  history  of  fire  insurance  has 
a  rating  organization  had  such  a  stormy 
career,  as  was  experienced  by  the  Board  of 
Fire  Underwriters  of  the  Pacific  during  a  period 
of  three  months.  From  its  commencement  of  op- 
erations on  February  1, 1895,  until  it  virtually  dis- 
banded May  7,  1895,  there  were  meetings  of  gen- 
eral agents  and  managers  practically  every  day. 
And  these  sessions  were  far  from  being  tea 
parties.  They  often  ended  with  several  members 
resigning  or  threatening  withdrawal  from  the 
Board.  If  this  was  not  the  order  of  business  at- 
tention was  given  to  suspending  rates. 

The  grand  crash  came  on  May  7,  1895,  when 
the  executive  committee  of  the  Board  suggested 
that  all  the  functions  of  the  organization  as  far 
as  they  applied  to  District  A,  and  as  much  of 
District  B,  as  was  confined  to  the  State  of  Cal- 
ifornia, be  suspended.  The  proposal  was  adopted 
and  the  Board,  for  the  time  being,  went  into 
oblivion. 


BUSINESS  RUNS  WILD 

From  May  until  December  of  that  year,  the 
fire  insurance  business  on  the  Pacific  Coast  ran 
wild.  There  were  no  agreements  in  force  be- 
tween companies.  They  made  their  rates  as  they 
willed.  The  sentiment  generally  was  "every  man 
for  himself  and  the  devil  take  the  hindmost." 

It  might  properly  be  thought  that  the  year 
1895,  during  which  the  greatest  rate  cutting  took 
place,  was  exceedingly  unprofitable  for  the  com- 
panies. The  present-day  underwriter  would  be 
justified  in  wondering  why  home  office  authori- 
ties did  not  insist  that  departmental  managers 
correct  their  ways,  and  establish  a  little  brotherly 
love.  A  side  light  is  thrown  on  the  situation  by 
a  report  of  M.  R.  Hjggins,  insurance  commis- 
sioner for  the  State  of  California  during  the 
year  1895.  In  his  annual  report  to  the  Gover- 
nor, he  stated: 

"There  is  a  great  hue  and  cry  made  about  the 
terrible  losses  of  the  insurance  companies  in  this 
State,  but  the  losses  are  all  calculated  upon  the 
rate  charged  for  the  past  few  years.  Taking  this 
as  a  basis,  the  companies  claim  to  have  lost,  dur- 
ing the  last  year,  about  $2,000,000.  But  the  fact 
is  overlooked  that  the  rate  has  steadily  increased 
since  the  formation  of  the  compact,  until  just 
before  the  rate  war  it  was  fully  20  per  cent 
higher,  and  this  notwithstanding  the  marked  in- 
crease in  the  efficiency  of  the  fire  departments 
in  every  city  of  the  State,  the  invention  of  auto- 
matic sprinklers,  and  the  general  increased 
strictness   concerning   building  construction. 

"I  have  never  heard  it  claimed  that  immedi- 
ately prior  to  the  formation  of  the  compact,  the 
companies  were  doing  a  losing  business  in  this 
State,  for  the  fire  loss  rate  then  was  lower  than 
the  average  for  twenty-one  years,  including  the 
very  high  rate  of  last  year,  and  the  expenses  cer- 
tainly proportionately  no  higher.  The  margin 
at  that  time  over  losses  and  expenses  was  about 
25  per  cent.  If,  then,  we  compute  the  loss  ac- 
cording to  the  rate  prevailing  at  that  time,  we 
find  the  companies  wrote  the  business  of  1895 
for  about  $700,000  less  than  they  would  have  re- 
ceived at  the  old  rate.  But,  as  there  was  a  mar- 
gin of  25  per  cent  in  the  old  rate,  it  will  not  do 
to  say  that,  even  writing  at  the  rate  of  last  year, 
the  companies  sustained  much,  if  any,  loss.  This 
is  borne  out,  also  by  the  sworn  reports  of  the 
companies,  which  show  that  the  loss  ratio  last 
year  was  60.6  per  cent,  and,  adding  35  per  cent 
for  expenses,  there  was  still  a  small  margin  left." 

That  the  companies  were  able  to  stand  the 
strain  of  the  rate  war  is  also  evidenced  by  the 
fact  that  but   a   few   were   forced   to   retire   from 


[Page  Sixteen] 


FIRE  INSURANCE  DEVELOPMENT 


the  Pacific  Coast  field  because  of  their  disastrous 
experience. 

WILLING  TO  CALL  TRUCE 

Several  managers  and  general  agents  were 
willing  to  call  a  truce  after  the  first  year  of  war- 
fare, 1895,  but  there  were  too  many,  who  still 
regarded  their  competitors  with  suspicion,  and 
balked  at  an  alliance.  However,  on  December 
20,  1895.  thirty-nine  company  representatives  at 
San  Francisco  met  and  came  to  the  first  under- 
standing since  control  of  affairs  went  out  of  the 
hands  of  the  Pacific  Board  in  the  preceding  May. 
They  agreed  not  to  write  for  a  longer  period 
than  one  year  on  certain  classifications.  This 
was  but  a  feeble  attempt  to  restore  order. 

A  call  was  next  issued  for  a  meeting  to  be 
held  at  Del  Monte,  Calif.,  on  March  30,  1896,  to 


consider  plans  for  the  formation  of  a  board  of 
underwriters.  For  a  time  it  was  believed  that 
some  agreement  would  be  reached.  Managers 
for  the  principal  companies  attended  the  meet- 
ing, and,  aftf^r  three  heated  sessions,  morning, 
afternoon  and  evening,  the  gathering  was  forced 
to  adjourn  with  nothing  accomplished,  other  than 
having  further  increased  the  hatred  between  the 
various  managers  and  company  representatives. 
However,  rate  cutting  had  already  reached  its 
greatest  intensity,  and  it  was  recognized  that  it 
was  only  a  matter  of  time  when  the  situation 
would  be  under  control  again.  Although  a  com- 
plete failure,  the  1896  meeting  at  Del  Monte, 
made  it  evident  that  a  rating  organization  was 
wanted.  Personal  antagonisms  prevented  i*- 
from  becoming  a  realization  at  this  time. 


Although  work  in  the  in- 
surance offices  progressed 
slowly  in  the  late  eighties, 
since  there  were  no  type- 
writers, adding  machines, 
etc.,  to  speed  up  the  day's 
labor,  time  was  found  for 
play.  The  Imperial  nine, 
pictured  above,  was  one 
of  several  insurance 
company  baseball  teams 
which  invariably  gave  a 
good  account  of  itself  on 
the  diamond 


[Page  Seventeen] 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  VIII 

PACIFIC  BOARD  REORGANIZED 


FROM  Api-:i.  1896,  until  April.  1897,  the  Pa- 
cific Coast  rate  war  was  not  carried  on  as 
intensively  as  during  the  first  year  of  tariff 
slashing.  The  non-Boarders  had  made  their 
cleanup  during  the  year  1895  and  the  early  part 
of  1896,  and  there  was  little  left  to  fight  over. 
Furthermore,  managers  for  all  companies  were 
beginning  to  realize  that  the  business  could  not 
be  profitable  if  they  continued  to  cut  rates  and 
pay  high   commissions. 

When  a  call  was  again  issued  to  meet  at 
Del  Monte  on  March  30,  1897,  to  discuss  the 
possibilities  of  forming  a  rating  organization, 
many  of  the  managers  answered  the  summons, 
hoping  that  the  war  was  over.  It  was.  And 
as  a  result  the  Board  of  Fire  Underwriters  of 
the  Pacific  was  reorganized,  and  has  been 
steadily  functioning  up  to  this  day. 

BOARDS  PRESERVE  SITUATION 

That  there  was  not  considerable  confusion  in 
getting  back  to  an  orderly  basis  was  due  to 
the  fact  that  the  formation  of  local  and  terri- 
torial Boards,  during  the  two  years  of  rate 
war,  made  it  possible  for  fire  insurance  prac- 
tices to  be  regulated  immediately.  At  the  com- 
mencement of  the  rate  war  the  Northwest  In- 
surance Association  controlled  the  situation 
somewhat  in  the  States  of  Oregon  and  Wash- 
ington. Many  of  the  agents  in  the  Mountain 
States  were  likewise  more  or  less  united.  To 
care  for  the  interests  of  agents,  local  Boards 
were  organized  at  several  of  the  larger  cities 
in  California.  Boards  were  formed  at  Los 
Angeles,  Sacramento,  Marysville  and  San  Jose. 
Later,  several  of  the  important  cities  in  Ala- 
meda county  followed  suit. 

Upon  the  reorganization  of  the  Pacific  Board, 
the  Pacific  Coast  territory  was  divided  into  six 
sections.  San  Francisco  was  known  as  Dis- 
trict A.  California,  with  the  exception  of  that 
part  included  in  Districts  A  and  C,  Nevada  and 
Alaska  were  District  B.  District  C  was  com- 
posed of  Southern  California  counties  and 
Arizona.  Oregon,  Washington  and  Idaho  were 
known  as  District  D,  Montana  as  District  E, 
and  Utah  as  District  F.  Managers  were  ap- 
pointed for  each  district,  while  the  head  office 
of  the  Pacific  Board  at  San  Francisco  was 
placed  in  charge  of  Alfred  Stillman,  who  was 
secretary  to  the  executive  committee,  and  E. 
F.  Mohrhardt,  secretary  of  the  Board. 


The  following  resolution,  adopted  at  the 
Del  Monte  meeting  in  1897,  re-established  the 
Board  of  Fire  Underwriters  of  the  Pacific: 

"Resolved — That  pending  the  promulgation 
of  rates  of  premium  as  provided  in  Article  5 
of  the  constitution,  the  rates  and  rules  of  the 
Board  of  Fire  Underwriters  of  the  Pacific 
which  were  in  force  on  the  27th  March,  1895, 
are  hereby  adopted  as  an  ad  interim  measure, 
to  be  effective  from  noon  March  30,  1897,  in- 
cluding such  changes  as  have  been  heretofore 
made  by  the  Northwest  Insurance  Association, 
Montana  Board  of  Fire  Underwriters,  Board  of 
Fire  Underwriters  of  Utah,  the  Arizona  Un- 
derwriters, the  Southern  California  Insurance 
Association  and  all  local  Boards  now  in  ex- 
istence in  the  State  of  California.  It  being 
understood  that  the  authority  to  promulgate 
rates  for  all  territory  under  its  jurisdiction  is 
hereby  vested  solely  in  the  Board  of  Fire  Un- 
derwriters of  the  Pacific.  That  compensation 
to  all  agents,  solicitors  and  brokers,  permitted 
by  this  constitution  shall  be  strictly  adhered 
to  on  and  after  April  7,  1897 — in  the  meantime 
no  member  shall  be  permitted  to  increase  com- 
pensation to  agents,  solicitors  or  brokers,  and 
that  all  agents'  shall  file  the  agreement  re- 
quired by  the  constitution  on  and  after  May 
1,  1897. 

'Tn  San  Francisco  policies  may  be  written  for 
such  applications  as  are  now  on  file  but  after 
the  adjournment  of  this  meeting  no  applica- 
tions shall  be  received  except  upon  the  explicit 
understanding  that  the  policies  thereon  shall 
be  written  at  the  tariff  rates  as  above  estab- 
lished. 

"Every  member  shall  immediately  notify  each 
of  his  agents  of  the  rate  of  compensation  to 
which  he  is  entitled  under  the  constitution 
and  no  member  shall  cancel  any  contract  with 
an  agent  for  a  consideration  without  the  con- 
sent and  approval  of  the  executive  committee, 
nor  agree  to  make  any  allowance,  payment, 
present  or  other  valuable  consideration  of  any 
kind  or  character  to  any  of  his  representa- 
tives, or  to  any  one  for  their  account." 

Thus  the  war  was  over.  And  in  the  words 
of  a  contemporary  of  1898,  "As  their  battles 
are  fierce  and  unrelenting,  so  is  their  peace, 
fair    and    honorable." 


[Page  Eighteen] 


FIRE  INSURANCE  DEVELOPMENT 


Considerable  improvement  lias  been  made  upon  fire  protection  apparatus  and  appli- 
ances during  the  past  few  years.  Fire  departments  in  the  principal  cities  of  thi3 
country  have  been  almost  completely  motorized  within  the  past  decade.  However, 
the  apparatus  used  by  fire  departments  even  during  the  closing  years  of  the  nineteenth 
century  was  extremely  crude,  compared  with  modern  standards.  The  fire  cart  pic- 
tured above  was  once  considered   "good."     Cut  by  courtesy  of  Fireman's   Fund 


Chapter  IX 

CLOSING  YEARS  OF  THE  NINETEENTH  CENTURY 


THE  past  twcnty-fivc  years  have  seen  a  vast 
change  in  the  fire  insurance  business  as 
conducted  on  the  Pacific  Coast.  Today  fire 
underwriting  practices  are  as  different  from 
those  of  the  closing  years  of  the  nineteenth  cen- 
tury as  they  are  from  the  methods  of  running 
the  business  in  the  early  days.  It  will  be  noted 
in  this  chapter  that  fire  insurance  practices 
have  greatly  improved  during  the  past  quarter 
century. 

Following  the  reorganization  of  the  Board 
of  Fire  Underwriters  of  the  Pacific  on  March, 
30.  1897.  the  activities  of  several  non-Board 
companies  were  still  marked  in  various  sec- 
tions on  the  Coast.  When  it  was  realized  that 
these  non-Board  offices  were  writing  a  good 
portion  of  business,  reinsurance  arrangements 
between  Board  companies  and  the  outsiders 
were  encouraged  through  an  amendment  to  the 
general  rules  of  the  Board  which  allowed  ac- 
ceptance of  reinsurance,  as  long  as  the  busi- 
ness was  written  at  full  Board  rates. 

The  first  attempt  of  a  local  Board  to  induce 
the  Pacific  Board  to  finance  the  former's  or- 
ganization resulted  in  the  strict  ruling  that 
"     *     *     *     expenses  of  any  organization  other 


than    the    Board   of    Fire    Underwriters    of   the 
Pacific  can  not  be  paid." 

NO  CREDIT  ALLOWED 

Regarding  the  credit  rule.  In  July,  1897, 
Board  agents  throughout  the  Pacific  Coast 
were  informed  that  the  premium  on  every 
policy  would  be  due  and  payable  on  the  date 
on  which  the  insurance  took  effect. 

Lack  of  interest  and  harmony  in  Pacific 
Board  circles  had  disrupted  the  organization 
once,  and  in  order  to  prevent  any  such  occur- 
rence again  the  followin;^  resolution  was 
adopted  in  the  latter  part  of  1897: 

"Resolved — That  the  roll  be  called  promptly 
at  time  of  call  for  meeting,  and  that  each 
member  who  reports  'present'  in  person  at  roll 
call  be  credited  $2.50  and  that  the  same  be 
deducted  from  the  amount  of  the  next  assess- 
ment  following." 

At  the  same  time  a  rule  was  also  passed  to 
the  effect  that  any  agent,  broker,  solicitor  or 
employe  of  the  Board,  who  was  convicted 
three  times  of  willful  violation  of  any  rule  or 
agreement,  should  be  disqualified  and  lose  his 
position. 


[Page  Nineteen] 


FIRE  INSURANCE  DEVELOPMENT 


Not  until  the  year  1898  did  sprinkler  pro- 
tection receive  any  attention  from  Pacific 
Coast  general  agents  and  managers.  In  Feb- 
ruary of  that  year,  the  Pacific  Board  sent  out 
the  following  circular: 

Reduction  for  Sprinkler  Equipment 

That  a  maximum  reduction  of  40  per  cent  be 
allowed  on  all  wet-pipe  sprinklered  risks  and 
33y3  per  cent  on  all  dry-pipe  sprinkler  risks, 
when  fully  equipped  in  accordance  with  the 
rules  of  the  Board.  Said  reductions  to  be  made 
only  in  manufacturing  risks  and  special  haz- 
ards. 

When  it  is  impracticable  to  follow  the  Board 
standard  or  equipment,  the  following  reductions 
shall  be  made  from  the  maximum  allowances 
for  the  deficiency  set  forth.  Each  policy  writ- 
ten at  reduced  rate  must  bear  not  less  than 
70  per  cent  co-insurance  clause : 

One    water    supply 50  per  cent 

Fire  pump  not  automatic 25  per  cent 

No    watchman 25  per  cent 

Watchman    but    no    clock 15  per  cent 

No   reliable  alarm  valve 15  per-cent 

REVENUE  STAMPS  ON  POLICY 

On  July   1,  1898,  a  Government  revenue  law 
went   into    effect,    which    provided    that    before 
a  fire  insurance   policy  could  be  delivered,   in 
ternal  revenue  stamps  had  to  be  affixed.     For 
each    dollar    a    one-half    cent    stamp    was    nec- 


essary. Before  delivery  of  the  policy  the 
stamps  affixed  had  to  be  canceled  by  writing 
or  stamping  the  initials  of  the  person  issuing 
the  policy,  and  the  date  upon  which  the  stamps 
were  canceled.  Companies  cautioned  agents 
against  affixing  stamps  to  policies  which  they 
were  not  certain  would  be  accepted  by  the  as- 
sured. 

In  the  summer  of  1898  rates  were  reduced 
at  San  Francisco  upon  the  equipment  of  a 
full-paid  fire  department.  As  regards  allow- 
ance for  co-insurance  the  following  schedule 
was  effective  in  San  Francisco: 

"*  *  *  special  rates  of  buildings  and 
stocks,  including  brick  theatres  in  San  Fran- 
cisco, other  than  special  hazards,  or  public 
warehouses,  are  subject  to  reduction  for  co- 
insurance as  follows: 

Brick   Buildings 

70  per  cent  co-insurance    15  per  cent 

80  per  cent  co-insurance    20  per  cent 

90  per  cent  co-insurance    25  per  cent 

Contents  of  Brick  Buildings 

80  per  cent  co-insurance    10  per  cent' 

90  per  cent  co-insurance    15  per  cent 

Frame  mercantile  buildings  and  stocks,  other 
than  special  hazards  or  public  warehouses: 
90  per  cent  co-insurance    10  per  cent 

In  this  chapter  it  has  been  endeavored  to 
point  out  a  few  of  the  practices,  rules  and  rates 
which  prevailed  during  the  years  1897-98-99. 


Note  the  qas  jets,  old  fashioned  wall  clock,  and  "youthful"    clerks.     The    above    scene    represents    a    busy 
oiffice  in  the  latter  part  of  the  nineteenth  cer.tury.     Incidentally  this  was  the  home  office  of 
the    Fireman's    Fund  at  San   Francisco 


[Pafre  Twenty] 


FIRE  INSURANCE  DEVELOPMENT 

Chapter  X 

THE  DAWN  OF  A  NEW  ERA 

WITH  the  commencement  of  the  twenti-  E.  Myron  Wolf,  for  the  year  1905.     The  totai 

eth  century,  it  can  be  stated   appropri-  premium  income  during  the  year  was  $10,353,- 

ately  that  a  new  era  in  fire  underwriting  046,   with   losses  paid  amounting  to  $3,883,540. 

on  the  Pacific  Coast  was  at  hand.     It  was  now  or  a  loss  ratio  of  38  per  cent.     The  growth  of 

three  years  after  the  great  rate  war  of  1895-96.  the  busmess  m  California  during  the  years  1900 

and   the   fire   insurance   business   was    again   in  to  1906  is  reflected  in  the  following  table: 

full   swing.  Year                          Premiums          Losses  Paid      Ratio 

During  the  period  1900  to  1906,  the  advance-       1900    $  5,795,507         $2,430,242         42 

ment  made  by  fire  underwriters  in  this  section       1901    7,522,401  2,344,581         31 

of  the   country   was   noteworthy.      Rates   were       1902    7,339,984  2,655,302         36 

regulated    so    that    they    imposed    no    hardship       1903    .     8,288,355  4,342,786         52 

upon  the  assured,  nor  were  they   too   low  for      1904    10,104,033  3,830,253         38 

the   companies   to   make  a   profit.     Loss   ratios       1905    10,353,808  3,883,540         38 

varied  but  slightly  during  the  first  five  years  of  During  1905,  approximately  7  per  cent  of  the 

this  century,  and  never  soared  high  enough  to  fire  insurance  business  transacted  in  this  State 

trouble  companies.  was    written    by    California    companies.      Com- 

The    antagonism    which    had    developed    be-  panics  of  other  States  wrote  54  per  cent,  and 

tween  fire  insurance  managers,  as  the  result  of  companies    of   foreign    countries    wrote    39   per 

the    rate    war,    had    now    entirely    disappeared.  cent.     The   risks   in    force   at   the   close   of  the 

These   conditions    make   it   clear   why    the    San  year   1905  totaled  $933,465,614. 

Francisco  conflagration  of  1906  halted  the  pro-  One   hundred   and   six   companies   transacted 

gress  of  the  business  only  for  the  time  being.  a  fire  insurance  business  in  California  during  the 

rArcrro^Ar^E-   r  ^ tj7 c  wArfTc  ^^^^  ^^^^-     '^^^  following  companies  operated 

INSURANCE  LAWS   VAGUt  in  this. State  prior  to  the  1906  conflagration: 

The  first  agitation  against  underwriters'  an-  Organized  in  California — the  California,  Fire- 

nexes  was  voiced  during  this  period,  as  it  was  man's  Fund  and  the  Home  Fire  i&  Marine, 

then   that  various   companies   were    organizing  Organized   in   other    States— Aetna,   Agricul- 

these  agencies.     An  insurance  commissioner  m  ^^ral.    Alliance,   American   of   Newark,    Ameri- 

one  of  the  Pacific  Coast  States  vehemently  de-  can     of     Boston,     American     of     Philadelphia, 

Glared  that  "this   masquerading   should  not  be  American     Central,     Assurance     Company     of 

permitted."  America,     Atlanta-Birmingham,     Austin     Fire, 

Insurance  laws  in  most  of  the  States  were  British  American,  Caledonian-American,  Calu- 
vague  and  indefinite,  which  accounts  for  the  met.  Citizens,  Commercial  Union,  N.  Y.,  Con- 
many  suggestions  constantly  made  for  new  cordia,  Connecticut,  Continental,  Delaware, 
legislation.  California  insurance  department  Dutchess,  Eagle  Fire,  Equitable,  F.  &  M., 
records  show  the  following  outstanding  recom-  Fire  Association,  Franklin,  German,  German 
mendations  to  have  been  made:  Alliance,  German-American,  German  Fire,  Ger- 

Submitting  of  all  charters,  articles  of  incor-  mania  Fire,  German  National,  Girard  F.  &  M., 
poration,  and  other  documents  of  similar  char-  Glens  Falls,  Globe  &  Rutgers,  Hanover,  Hart- 
acter  by  a  company,  desiring  admittance  to  the  ford.  Home,  Indemnity  Fire,  Insurance  Corn- 
State,  to  the  Attorney-General.  pany  of  North  America,    Mercantile  F.   &  M., 

Annual  licensing  of  all  companies  by  insur-  Michigan  F.  &  M.,  Milwaukee  Mechanics,  Nas- 

ance   departments.  sau.    National,    National    Union,    New    Hamp- 

Enactment  of  a  law   prohibiting  a  company  shire,    New    York    Fire,    Niagara,    North    Ger- 

from   withdrawing   from   a    State   while    it   had  man,    North    River,    Northwestern    F.    &    M., 

any  liability  therein.  Northwestern  National,  Orient,   Pelican,  Penn- 

These  suggestions  indicate  that  laws  during  sylvania,    Phenix,    Phoenix,    Providence- Wash- 

the    early   years   of   the    twentieth    century    were  ington,     Queen,     Queen     City,     Rochester-Ger- 

exceedingly  lax.  man,   Security  of   Baltimore,    Security   of   New 

Some  idea  of  the  volume  of  stock  fire  busi-  Haven,   Springfield   F.    &   M.,   Spring   Gardens, 

ness,  which  was  transacted  in  the  State  of  Cali-  St.  Paul  F.  &  M..  Teutonia,  Traders,  Union  of 

fornia   prior   to  the    1906  conflagration,   is   evi-  Philadelphia,    United    Firemens,    Victoria    Fire, 

denced  in  the  report  of  Insurance  Commissioner  Westchester  and  Williamsburg  City. 


[Page  Twenty-one] 


F[RE INSURANCE  DEVELOPMENT 


Companies  organized  in  foreign  countries — 
Aachen  &  Munich,  Alliance  of  London,  Atlas, 
Austrian  Phoenix,  British  America,  Caledonian, 
Commercial  Union,  Hamburg-Bremen,  Hel- 
vetia Swiss,  Law  Union  &  Crown,  Liverpool 
&  London  &  Globe,  London  Assurance,  Lon- 
don &  Lancashire,  New  Zealand,  North  British 
&  Mercantile,  Northern,  North  German  Fire, 
Norwich  Union.  Palatine,  Phoenix  Assurance, 
Prussian  National,  Rhine  &  Moselle,  Royal, 
Royal  Exchange,  Scottish  Union  &  National, 
State.  Sun,  Svea,  Transatlantic,  Union  Assur- 
ance and  Western  Assurance. 


It  is  interesting  to  note  that  out  of  the  above 
106  companies,  seventy-two,  including  those 
which  have  since  changed  their  names,  or  re- 
entered after  withdrawing,  are  still  writing  fire 
insurance  in  this  State.  The  San  Francisco 
conflagration  of  1906  was  the  great  test  of 
financial  soundness  and  stability  of  fire  insur- 
ance companies.  Those  which  emerged  dam- 
aged but  undaunted,  and  there  was  a  large 
number  considering  the  extent  of  the  catastrophe, 
have  proved  to  the  world  the  stability  of  stock 
insurance. 


li 


1=1 


■i^^rt^f^rgjfeaij^i^Ji^^: 


During  the  closing  years  of  tiie 
nineteenth  century  the  basement 
or  first  story  office  shown  herein 
was  considered  as  desirable  as  the 
present-day  ground  floor  head- 
quarters. The  late  beloved  Geo.  D. 
Dornin,  who  founded  the  Pacific 
Coast  general  agency  now  con- 
ducted by  his  sons,  Geo.  W.  and 
John  C,  can  be  seen  in  this 
reproduction  standing  on  the  stair- 
way to  his  office,  which  was  lo- 
cated at  409  California  street.  It 
will  be  noted  that  Mr.  Dornin  rep- 
resented the  National  Fire  as  well 
as  the  Springfield,  which  is  still 
represented    by   his  sons. 


3l  [ 


[Page  Tweiity-tzi'o] 


FIRE  INSURANCE  DEVELOPMENT 


Chapter  XI 

THE  SAN  FRANCISCO  CONFLAGRATION  OF  1906 


AT  ABOL'T  quarter  past  five  on  the  morn- 
ing of  April  18,  1906,  an  earthquake  of 
unusual  violence  was  felt  along  a  con- 
s'derable  portion  of  the  California  Coast  and  at 
San  Francisco  in  particular.  Few,  if  any,  de- 
scriptions tell  better  of  the  first  impressions  on 
the  eventful  morning  than  that  written  by  Geo. 
W.  Brooks,  then,  as  now,  secretary  and  man- 
aging underwriter  of  the  California  Insurance 
Company,  in  his  book,  "The  Spirit  of  1906." 
Mr.  Brooks  states  in  part. 

"I  was  bewildered,  dazed,  and  only  awakened 
fully  when  my  wife  suddenly  screamed,  'Earth- 
quake!' It  was  a  whopper,  bringing  with  it  a 
ghastly  sensation  of  utter  and  absolute  help- 
lessness and  an  involuntary  prayer  that  the  vi- 
brations might  cease.  Short  as  was  the  period 
of  the  earth's  rocking,  it  seemed  interminable, 
and  the  fear  that  the  end  would  never  come 
dominated  the  prayer  and  brought  home  with 
tremendous  import  the  realization  of  our  in- 
significance, of  what  mere  atoms  we  become 
when  turned  on  the  wheel  of  destiny  in  the 
midst  of  such  abnormal  phenomena  of  na- 
ture's forces." 

FIRES  FOLLOW  EARTHQUAKE 

In  the  cities  of  San  Francisco  and  Santa 
Rosa  the  earthquake  was  followed  by  fires. 
Uncontrolled,  the  fire  raged  in  the  former  city 
for  two  days.  It  was  brought  under  control 
on  the  third  day,  and  ere  the  fifth  day  had 
closed  was  entirely  extinguished.  It  was  esti- 
mated at  the  time  that,  immediately  following 
the  earthquake,  as  many  as  fifty  fires  started. 
A  few  of  these  were  promptly  extinguished, 
while  the  majority  united  with  others  and  thus 
spread  the  terror.  The  firemen  were  eager  to 
do  their  duty.  But  the  Spring  Valley  Water 
Companv's  feed  main  had  been  broken,  and 
the  outlook  was  dark.  From  an  insurance 
point  of  view,  Brooks  writes,  "This  was  the 
spur  I  needed.  Fires  and  no  water!  It  was 
a  call  to  duty." 

Another  unfortunate  occurrence  was  the  fatal 
injury  of  Fire  Chief  Dennis  Sullivan,  who  was 
struck  by  a  falling  chimney  and  immediately 
incapacitated  from  directing  the  eflForts  of  the 
firefighters — work  for  which  he  was  so  well 
qualified.  Fortunately,  however,  there  was 
practically  no  wind,  and  the  dynamiting  of 
bu'ldings  finally  checked  the  flames. 

Progress  of  the  fire  fighters  was  further 
hindered  by  many  smaller  causes.    The  unwise 


use  of  dynamite  resulted  in  several  blazes  start- 
ing anew.  A  fire  in  the  Hayes  Valley  district 
was  reported  to  have  been  caused  by  a  woman, 
who  started  to  prepare  breakfast  after  the 
chimney  of  her  house  had  been  shaken  down. 
The  blaze  swept  over  several  blocks  of  valu- 
able property.  Carelessness  of  soldiers,  who 
were  on  guard  duty,  is  also  blamed  for  sev- 
eral  fires. 

ALL  CLASSES  LEVELED 

Again  quoting  Mr.  Brooks:  "No  lights  nor 
fires  were  permitted  in  the  houses.  It  was 
either  retire  at  sundown  or  retire  in  the  dark. 
Whatever  water  was  needed  had  to  be  car- 
ried from  the  nearest  well  and  even  after  the 
mains  had  been  restored  to  normal  efficiency 
this  practice  was  continued  for  fear  that  the 
possibly  broken  sewers  might  contaminate  or 
pollute  the  water.  No  fires  or  cooking  were 
permitted  in  any  building  until  every  chimney 
and  flue  had  been  passed  upon  by  authorities. 
*  *  *  a  food  station  was  opened  across  the 
street  in  an  old  carriage  house  which  belo.nged 
to  J.  L.  Flood.  Here  lines  would  form  to  re- 
ceive rations,  the  millionaire  rubbing  shoulders 
with  the  laborer.  The  panhandler  got  as  much 
as  the  plutocrat.  The  disaster  leveled  all 
classes.  A  million  dollars  in  one's  pocket 
would  have  been  of  little  use.  Noth'ng  could 
be  bought  with  it,  and  it  could  not  serve  as 
either   food   or   drink," 

The  records  of  the  California  insurance  de- 
partment were  saved  from  the  great  conflagra- 
tion. This  was  exceptionally  fortunate,  not 
only  because  of  the  value  of  the  records  but 
because  of  the  litigation  which  followed  the 
1906  disaster.  The  department  reported  that 
the  fire  had  burned  over  an  area  of  2593  acres, 
or  4.05  square  miles.  Nearly  25,000  buildings, 
including  residences,  were  destroyed.  From 
official  data  the  loss  was  estimated  at  $350,000,- 
000,  on  which  there  was  about  $250,000,000  in- 
surance. Eighty  per  cent  of  the  loss  was  set- 
tled by  the  companies. 

The  fires  following  the  earthquake  had 
hardly  been  extinguished  before  all  thoughts 
were  turned  to  the  insurance  phase  of  the 
situation.  Questions  as  to  the  liability  of 
the  fire  companies,  and  their  ability  to  meet 
their  obligations,  were  heard  on  all  sides. 
Insurance  Commissioner  E.  Myron  Wolf  re- 
ported, "*  *  *  the  insured  generally  had 
given    but    little   consideration    to    the   contents 


[Page  Tzvcnty-thrcc] 


FIRE  INSURANCE  DEVELOPMENT 


of  his  policies,  or  to  the  financial  standing  of 
the  companies  in  which  he  had  purchased  in- 
demnity, and  many  ordinarily  careful  business 
men  had  failed  to  give  the  close  attention  to 
this  important  feature  of  commercial  activity 
that  generally  prevails  in   commercial  affairs." 

Practically  all  of  the  insurance  companies 
moved  their  Pacific  Coast  departments  from 
the  fire-swept  metropolis  to  Oakland,  but  the 
insurance  department  took  quarters  in  a  flat 
on  Fillmore  street,  which  had  then  become  the 
main  business  thoroughfare.  It  was  at  once 
recognized  that  many  of  the  companies  were 
badlj^  crippled  financially  by  the  conflagration 
and,  fearing  adverse  action  by  some  of  the  in- 
surance departments  that  would  make  loss  set- 
tlements more  difficult,  the  California  depart- 
ment sent  a  letter  to  the  commissioner  of  each 
State,  requesting  that  the  utmost  consideration 
possible  be  shown,  and  the  greatest  amount  of 
discretion    be   exercised   in    dealing   with   them. 

Through  the  daily  newspapers,  the  insurance 
department  informed  the  public  that  all  policies 
required  immediate  notice  of  loss  to  be  given 
the  company  by  each  assured  who  had  suffered 
loss,  and  that  this  notice  was  to  be  followed 
by  a  proof  of  loss.  Many  fire  insurance  com- 
pam'es  were  accused  of  lack  of  tact  in  handling 
the  situation  created  by  the  grave  disaster.  It 
was  declared  that  many  company  managers 
gave  their  assureds  little,  if  any,  satisfaction  as 
to  the  possibility  and  time  of  loss  settlements. 
However,  if  any  of  the  managers  lacked  in 
courtesy,  it  must  be  remembered  that  they 
dealt  with  many  claimants  who  were  entirely 
unreasonable.  In  fact,  there  were  many  who 
tried  to  press  dishonest  claims. 

A  number  of  State  agents,  dissatisfied  with 
the  methods  adopted  by  their  respective  com- 
panies in  the  matter  of  adjustment  of  losses, 
resigned.  In  practically  every  instance  they  had 
been  associated  with  the  companies  for  many 
years.  Prior  to  the  1906  conflagration,  the 
managers  had  the  authority  to  adjust  and  settle 
losses,  and  they  realized  that  much  business 
had  been  placed  with  their  companies  on  the 
basis  of  personal  friendship.  When  Eastern  ad- 
justers were  sent  here  to  handle  losses,  these 
managers  regarded  such  action  as  depriving 
them  of  their  power.  This  resulted  in  the  ten- 
dering of  many  resignations. 

FORGET  NAMES  OF  COMPANIES 

A  number  of  people  had  lost  their  policies  in 


the  fire  and  did  not  know  the  names  of  the 
companies  with  which  they  were  insured.  A 
questionnaire  was  published  in  the  news- 
papers, calling  upon  those  who  had  lost  their 
policies,  and  did  not  know  the  names  of  the 
companies,  to  give  specified  data  in  reference 
thereto.  Lists  of  such  unfortunate  policy- 
holders were  then  made  up  by  the  insurance 
department,  and  sent  to  the  secretary  of  a  tem- 
porary organization  known  as  the  Fire  Un- 
derwriters' Adjusting  Bureau,  which  was  com- 
prised of  all  the  companies,  and  were  by  him 
submitted  to  the  various  managers.  In  this 
manner  the  desired  information  was  secured 
for  many  of  the  policyholders.  E.  F.  Mohr- 
hardt  was  secretary  of  the  adjusting  bureau, 
and  under  his  management  between  1350  and 
1400  losses  were  adjusted,  with  a  settlement  of 
approximately  $90,000,000. 

As  the  end  of  the  period  of  s'xty  days  from 
the  conflagration  approached,  it  became  evi- 
dent that,  for  various  reasons,  a  great  many 
claimants  would  be  unable  to  file  their  proofs 
of  loss  within  the  time  specified.  The  records 
of  the  assureds  and  of  the  brokers,  in  many 
cases,  had  been  destroyed.  Many  were  unable 
to  open  the  vaults  which  contained  their  books. 
Apprec'ating  the  unusual  conditions,  and  v/ith 
a  commendable  spirit  of  fairness,  some  of  the 
companies  voluntarily  waived  notice  of  loss  in 
writing  and  extended  the  time  for  filing  proofs 
of  loss. 

SUMMARY  OF  1906  RESULTS 

On  August  1,  1907,  Insurance  Commissioner 
Wolf  published  a  complete  summary  of  fire  in- 
surance results  in  California  during  the  year 
1906.  This  showed  premiums  received  amount- 
ing to  $13,368,351.  Losses  paid  during  the 
year  totaled  $146,306,377,  showing  a  loss  ratio 
of  1094  per  cent.  The  San  Francisco  confla- 
gration had  boosted  the  paid  loss  ratio  for  the 
twenty-year  period,  1887  to  1907,  to  145  per 
cent.  In  less  than  five  days,  whatever  profit 
had  been  made  by  fire  insurance  companies 
operating  in  the  State  of  California  during 
many  decades  was  turned  to  a  complete  loss. 

After  order  was  restored,  the  verdict,  in 
reference  to  settlements,  as  coming  from  the 
State  insurance  commissioner,  was,  "On  the 
whole,  the  companies  made  a  remarkably  good 
showing." 


[Page  Txvcnty-four] 


FIRE  INSURANCE  DEVELOPMENT 


SAN    FRANCISCO  AS  OF   1906 
Ruins  at  the   northwest  corner  of   Bush   street  and   Grant   avenue,    following    the    big   earthquake    and    con- 
flagration.     Three    local    insurance    men    are   seen    here  adjusting  the  loss.     These  men,  from  left  to  right, 
Chas.  M.   Hackmeier,  Henry  Louis  and  Sam   Louis,  are  still  engaged   In  the   insurance   business  at  this  city 


[Page  Twenty-five] 


FJRE  INSURANCE  DEVELOPMENT 


Chapter  XII 

A    PERIOD    OF    RECONSTRUCTION 


IN  A  previous  chapter,  attention  was  called  to 
the  laxity  of  laws  regulating  fire  insurance 
practices  in  the  State  of  California  and  on 
the  Pacific  Coast.  Not  until  the  San  Francisco 
conflagration  of  1906.  did  company  officials, 
managers  and  the  public  realize  that  the  im- 
mediate enactment  of  considerable  legislation 
was  necessary  for  the  interests  of  all.  Com- 
panies appreciated  the  fact  that,  unless  they 
were  protected  under  certain  conditions,  their 
welfare  would  be  menaced.  On  the  other  hand, 
the  public  clamored  for  legislation,  which 
would  protect  its  interests  under  abnormal  cir- 
cumstances. 

NEIV  INSURANCE  CODE 

With  the  realization  of  the  necessity  for 
proper  insurance  legislation,  the  California 
Legislature  of  1907  made  this  one  of  the  prin- 
cipal subjects  of  consideration.  A  complete 
insurance  code  was  drawn  up,  and  adopted. 
The  main  provisions  of  the  code  will  be  dis- 
cussed in  this  chapter. 

First  of  all,  the  amount  of  capital  required  for 
the  transacting  of  the  various  branches  of  in- 
surance was  increased.  Prior  to  1907,  a  com- 
pany was  permitted  to  transact  both  fire  and 
marine  insurance  if  its  capital  was  no  less 
than  $200,000.  Under  the  new  California  stat- 
ute, companies,  which  wrote  both  fire  and 
marine,  were  required  to  have  a  capital  of  $400,- 
000.  Owing  to  the  fact  that  certain  California 
companies  requested  time  within  which  to  in- 
crease their  capital  stocks,  it  was  arranged  thai 
the  provision  should  not  become  operative 
until  January  1,  1908.  Companies  transactmg 
business  in  California,  which  were  organized 
under  the  laws  of  foreign  countries,  were  re- 
quired to  maintain  a  deposit  somewhere  in  the 
United  Stiites,  for  the  benefit  of  their  policy- 
holders, equal  to  the  amount  of  capital  stock 
required  of  an  American  company. 

Prior  to  the  time  under  consideration  there 
had  been  a  certain  amount  of  laxity  in  the  ad- 
mission of  companies  to  the  State,  especially  in 
the  matter  of  legal  requirements.  A  provision 
was  adopted  by  the  1907  Leg'slature,  which  re- 
quired the  submission  to  the  Attorney-General 


of  all  papers,  upon  which  the  certificate  of  au- 
thority to  a  company  to  transact  business  in 
this  State  was  based.  Regard'ng  certificates  of 
authority,  another  change  adopted  provided 
that  an  annual  certificate  be  secured  by  each 
company. 

WITHDRAWAL  PROCEDURE  CHANGED 

The  law  in  reference  to  the  procedure  by 
companies,  upon  withdrawal  from  the  State, 
was  made  more  definite.  Heretofore  the  statute 
merely  required  that  a  company  surrender  its 
certificate  of  authority,  and  that  the  insurance 
commissioner  make  public  such  withdrawal. 
Under  the  new  provision,  a  formal  application 
for  withdrawal  was  made  necessary,  and  was 
required  to  be  published  for  one  week;  fol- 
lowing that,  an  examination  of  the  books  of 
the  company  to  determine  that  it  had  no  out- 
standing liabilities  and  no  outstanding  policies 
held  b}'  residents  of  the  State,  was  required,  all 
expenses  in  connection  with  this  procedure  to 
be  paid  by  the  company. 

Among  other  features  of  the  new  code,  sur- 
plus line  insurance  was  regulated;  provision 
was  made  for  the  securing  of  information  from 
companies  by  the  assured;  powers  of  general 
agents  were  broadened,  and  the  amount  of  their 
bond  was  increased  from  $2000  to  $20,000; 
State  fees  were  increased;  time  for  filing  annual 
statements  was  advanced,  and  company  invest- 
ments were  regulated. 

DUTIES  CLEARLY  DEFINED 

In  short,  the  duties  of  the  insurance  depart- 
ment and  the  companies  were  more  clearly 
defined,  and  the  new  legislation  was  in  line 
with  that  of  other  States  at  that  time. 

The  embers  of  the  1906  conflagration  were 
still  glowing,  when  San  Franciscans  turned 
their  attention  to  reconstructing  the  city.  And 
they  wasted  no  time  in  rebuilding  the  homes 
and  buildings,  which  had  been  destroyed  by 
earthquake  and  fire.  Similarly,  no  time  was 
lost  in  revising  the  State  insurance  code.  Other 
Pacific  Coast  States  fell  in  line.  The  experi- 
ence at  San  Francisco  had,  at  least,  caused  a 
great  advancement  in  the  fire  underwriting 
business   and   insurance  legislation. 


[Page  Txiicnty-six\ 


FIRE  INSURANCE  DEVELOPMENT 


Directly  after  the  San  Francisco  conflagration  of  190  6,  the  Pacific  Coast  general  agency  of  Christenson 
&  Goodwin  opened  temporary  headquarters  at  Oakland,  Calif.,  along  with  other  Pacific  departmental 
offices.  The  adjusting  force  of  Christenson  &  Goodwin  is  shown  above.  Manager  Benj.  Goodwin  is 
standing  in  the  center.  He  can  be  distinguished  by  his  gray  vest.  On  the  right  side  of  the  front  pole, 
wearing   a   derby,   is  the   late   Major   Christenson.      Nine     members    of    the    above    group    are    still    in    the 

employ   of   Manager   Goodwin 


Chapter  XIII 

FULL  STEAM  AHEAD  AGAIN 


AS  STATED  in  the  preceding'  chapter,  the  at- 
tempts to  correct  the  evils  which  existed  as 
the  results  of  a  laxity  in  fire  insurance  leg- 
islation were  made.  Although  a  few  of  the  laws, 
which  were  adopted  by  the  California  Legislature 
of  1907,  were  not  in  the  best  interests  of  either 
the  fire  companies  or  the  insuring  public,  a  dis- 
tinct step  in  advancement  had  been  taken.  In 
fact,  it  remained  now  for  the  public  to  cut  down 
the  fire  waste,  and  thus  prevent  destruction  and 
excessive  fire  insurance  rates. 

CONDITIONS  SUMMARIZED 

No  better  summary  of  conditions  generally  as 
to  fire  losses  can  be  written,  than  that  contained 
in  a  report  of  the  California  insurance  depart- 
ment, which  was  made  public  early  in  1908.  Al- 
though the  report  refers,  in  many  instances,  to 
San  Francisco,  the  conditions  described  existed 
throughout  the  Pacific  Coast,  and  in  many  parts 
of  the  country.     In  part,  it  is  as  follows : 

"The  late  reports  of  this  department  dealt  in  a 
very  large  degree  with  the  great  San  Francisco 
conflagration  loss  of  1906.  Reference  was  made 
to  the  tremendous  drain  generally  upon  the  re- 
sources of  this  country  through  fire  losses.  Only 
a  country  as  rich  as  ours,  blessed  with  such  a 
wealth  of  agricultural  and  mineral  products,  could 
stand    the    drain.     Statistics    have   been    compiled 


showing  that  the  average  per  capita  loss  for  the 
five  years  ending  December  31,  1907,  is  $3.02, 
while  the  average  per  capita  loss  for  Germany, 
France,  Italy,  Austria,  Denmark,  and  Switzer- 
land, is  2)3  cents;  that  thirty  foreign  cities  have 
a  per  capita  loss  of  61  cents  as  against  $3.10  in 
the  five  years  average  of  252  cities  in- this  country, 
and  that  the  number  of  fires  to  each' 1000  of  pop- 
ulation in  the  same  American  cities  is  4.05,  as 
against  0.86  for  those  of  Europe. 

"It  is  claimed  that  the  loss  by  fire  in  the  United 
States  for  the  year  1907  was  nearly  $200,000,000. 
The  indifference  on  the  part  of  the  people  upon 
this  subject  and  their 'failure  to  appreciate  its  im- 
portance are  surprising. 

UNFAVORABLE  SHOWING 

"It  will  be  seen  from  these  figures  that  this 
country  makes  a  very  unfavorable  showing  in 
comparison  with  European  countries.  It  is 
claimed  that  in  Europe  fires  seldom  get  beyond 
the  building  in  which  they  originate.  The  people 
are  schooled  and  educated  in  the  thought  of  tak- 
ing great  precautions  to  guard  against  fire  dam- 
age. In  some  of  the  European  countries  the  law 
makes  a  landlord  responsible  to  the  tenants  and 
neighbors  for  negligence  if  a  fire  starts  from  a 
defect  in  the  building,  and  if  the  fire  is  due  to 
the  carelessness  of  the  tenant  he  is  held  re- 
sponsible   to    the    landlord    and    his    neighbors. 


[Page  Twciity-scvoi} 


FIRE  INSURANCE  DEVELOPMENT 


"It  is  true  that  conditions  are  somewhat  dif- 
ferent in  this  country  in  that  wood  is  much 
cheaper  and.  therefore,  much  more  generally 
used,  and  the  growth  of  our  cities  and  towns 
is  much  more  rapid.  The  water  supply  and 
the  fire-fighting  facilities  do  not  keep  pace  with 
th's  growth;  there  is  a  failure  to  enact  proper 
building  regulations,  and  a  laxity  in  enforcing 
those  enacted;  the  many  uses  to  which  elec- 
tricity is  being  put  for  both  light  and  power, 
the  rapid  construction  of  manufacturing  plants, 
and  the  fact  that  these  are  frequently  com- 
pelled to  work  overtime  without  shutting  down 
to  overhaul  the  machinery,  in  order  to  meet 
the  demands  made  upon  them,  are  all  causes 
that  contribute  to  excessive  waste  by  fires  in 
this  country." 


It  was  gratifying  to  fire  underwriters  to  note 
that  the  public  responded  to  this  appeal  to  pre- 
vent fires  and  check  the  economic  loss.  Dur- 
ing the  ensuing  decade,  1909  to  1918,  the  incur- 
red loss  ratio  for  the  State  of  California,  each 
year,  was  as  follows: 


1909. 
1910. 
1911. 
1912. 
1913. 


.31 

1914 

32 

1915 

.30 

1916 

.34 

1917 

44 

1918 

.41 
.49 
.35 
.35 
.32 


The  loss  ratio  for  the  ten  years  was  36  per 
cent.  The  total  premium  income  for  the  ten- 
year  period,  1909  to  1918,  amounted  to  $166,291,- 
355,  or  a  yearly  average  of  $16,629,135.  Fire 
underwriting  again   sailed   smoothly. 


^ 


■'ll.VjMl 


M», 


Home   offices   of  western   companies   were   ne.ther   outstanding    nor   landmarks 

prior   to    the    1906    conflagration    at    San    Francisco,    as    is    evidenced    by    the 

above    picture    of    the    headquarters    of    the    California     Insurance    Company 

from   June,   1905,  to   April,   1906 


[Page  Twciity-eigitt] 


FIRE  INSURANCE  DEVELOPMENT 
Chapter  XIV 

EFFECTS  OF  A  WAR 

WHEREAS  it  may  be  said  that  fire  under-  growing  demand   for  almost  all  products  grown 

writing    on    the    Pacific    Coast    was    in-  or  manufactured  in  this  country,  and  prices   for 

fluenced    by    conditions    "within"    during  the    same    kept    soaring,    practically    a    complete 

the  first  fifty  years  of  the  business  in  this  section  absence  of  moral  hazard  was  noted. 

of   the   country,   powers   "without"   have   exerted  The   efifects   of   the   World   War    upon    Pacific 

their    influence    over    fire    insurance    during    the  Coast    fire    insurance   operations    are    evident    by 

past     two     decades.      The     development    of     fire  scanning  the  following  figures: 

underwriting  on   this   Coast,    from    1852  to   1900,  PACIFIC  COAST  FIRE  BUSINESS 

depended   largely  upon   the  co-operation   between  Pal^j            Incurred 

underwriters  and  companies.     There  was  enough  ^^^r                  Premiums           Loss  Ratio    Loss  Ratio 

business    for   all.      No    particularly    marked    con-  1918  .;;;;;;  :'*48;oi2.'883                 34                   34 

flagrations     upset     loss     experiences.      Only     the      1919 57,717,222  34  36 

minor   differences  within   the   ranks   of  the   busi-       ^^^^ 69,453,781  38  39 

ness  tended  to  check  progress.     In  fact,  the  rate  Although  premium  income  increased  consider- 

war  of  1895  and  1896  almost  spelled  disaster  for  ably  during  1920  as  compared  with  the  year  pre- 

the  companies.  ceding,   the   higher   loss   ratio   was   not   welcome. 

Unlike  the   earlier  period  in  the  business,  fire  Especially  in  view  of  the  fact  that  it  was,  in  no 

insurance  on  the   Pacific  Coast  during  the  years  small  measure,  due  to  a  growing  moral  hazard, 

of  the  twentieth  century  to  date  has  been  affected  Values    were    decreasing    during    the    latter    six 

1)y  conditions   from  "without."     The   1906  earth-  months  of  the  year,  the  market  was  tightening, 

quake    and    conflagration    at    San    Francisco    ex-  and  buying  fell  off  noticeably.     All  this  was  di- 

emplifies   this.     Things   had  been   running   along  meetly    accountable    to    the    after-effects    of    the 

smoothly     for    almost    ten    years.     The     Pacific  World  War. 

Coast  was  an  exceedingly  bright  spot  in  the  rec-  "ONE  BRIGHT  SPOT" 

ords  of  the  companies.     And  then,  beyond  any-  „,                  ,„^„                    .     ,     ,       ,. 

one's  control  but  that  of  Providence,  a  loss  was  ,  ^\^    ^^^'    ^^^0    was    particularly    d.scouragmg 

written  on  the  books   of  the   companies  totaling  ^f  ^5f  co^Pames  operatmg  m  the  Eastern    Alid- 

$250  000  000  Western   and   Southern   States.     The    Pacific 

Then  'followed  a  period  of  reconstruction.  An-  ^^^'^  "^'"'"^  ^^^^^l  t^^T'l^  ^°  '''  ^?"'-  ,'''' 
other  decade  passed.  It  appeared  as  though  there  "io"ths  to  a  year  behmd  the  waves  of  either 
were  no  trials  and  tribulations  for  Pacific  Coast  P^-o^P^^ty  or  depression,  offered  the  only  en- 
fire  underwriters  for  some  time  to  come.  Of  ^ouragement.  But  even  this  section  was  to  suf- 
course,  the  war  in  Europe  during  1914,  1915  and  J^'-  ,  ^'^^  business  depression  of  1921  did  not 
1916  affected  business  conditions  in  the  United  ^'^  }^^  ^f^\^''  ^^^'^  ^^  hard  as  it  did  other 
States,  but  there  was  no  tendency  to  disturb  '^^^'°"'  f  ^  ^^^  country,  but,  nevertheless,  it  was 
fire  underwriting  on  the  Pacific  Coast.  During  ^"  ""Y", '°T  J'n'^nnnni^',^  .'""'"L?''"™""'  T 
the  aforesaid  years,  premiums  increased  slightly.  ^^'^"'^   ^f,  ^^  $10,000,000  during   1921,   while  the 

incurred  loss  ratio  established  the  highest  record 

WAR  BOOSTS  PREMIUM  INCOME  since    the    1906   conflagration    at    San    Francisco. 

In  April,  1917,  this  country  entered  the  world  It  was  in  excess  of  50  per  cent.     But  despite  all 

conflict.     Values  all  over  the  country  increased.  this,   the    Pacific   Coast  continued   to  be  held  by 

And    as    a    result,    the    premium    income    of    fire  company  executives  as   the   "one   bright   spot." 

companies    on   the    Pacific    Coast,    as   well    as    in  But,  as   conditions   have   been   readjusted   dur- 

other  sections  of  the  United  States,  was  boosted.  ing  other  periods  of  distress,  so  are  the  abnormal 

However,  this  territory  did  not  benefit  as  much  effects  of  the  World  War  gradually  disappearing, 

as   others.     Highly  gratifying  was  the   fact  that  While  fire  underwriters  are  still  dissatisfied  with 

the   loss   ratio,   both   paid   and   incurred,   was   on  conditions   in   the  Eastern,   Middle   Western   and 

the    decline.      Premiums    written    on    this    Coast  Southern    sections    of    the    country,    the    Pacific 

during    1917    amounted    to    $41,767,164.     Losses  Coast    has    emerged    from    the    state    of    "hard 

paid  totaled  $13,691,857,  showing  a  loss  ratio  of  times."    The   fire   waste   is  being  cut  down,  and 

33  per  cent,  while  losses  incurred  were  $14,456,-  the    marked    increase    in    building    operations    is 

302.  showing  a  loss  ratio  of  35  per  cent.  greatly     stimulating     premium     income.     There 

With  values  continuing  to  mount,  the  business  seems  to  be  a  complete  lack  of  pessimism  among 
of  fire  companies  in  this  section,  as  elsewhere,  Coast  fire  underwriters,  and  the  future  is  gen- 
took  on  larger  proportions.    Since  there  was  a  erally  held  as  exceedingly  bright. 


[Page  Tzvciity-uinc] 


FIRE  INSURANCE  r)E\ELOPMENT 


Chapter  XV 

AD    INFINITUM 

USUALLY  all  narrat'ons  have  a  happy  end- 
ing; especially  if  they  are  fiction.  But  it 
is  also  gratifying  to  relate  that,  in  this 
concluding  chapter  of  the  history  of  the  first 
seventy  years  of  fire  underwriting  on  the  Pa- 
cific Coast,  the  ending  is  a  very  happy  one. 
And,  moreover,  the  outlook  for  the  future  is 
exceedingly  bright.  As  stated  in  the  preced- 
ing chapter,  conditions  generally  must  readjust 
themselves;  and  this  is  being  accomplished. 

Fire  underwriters  in  th's  section  of  the 
country  have  had  a  harder  task  in  developing 
the  business  than  might  be  imagined.  In  most 
instances,  thousands  of  miles  away  from  the 
home  offices  of  their  companies,  supervision 
of  this  field  has  been  left  entirely  to  them. 
True,  the  passing  years  have  developed 
rapid  means  of  communication  that  have 
bridged  the  gap,  but.  nevertheless,  it  has  taken 
a  Western  underwriter  to  underwrite  in  the 
West.  Even  today  conditions  on  the  Pacific 
Coast  are  vastly  diflferent  than  those  in  other 
sections  of  the  country,  and  the  man  best 
equipped  to  guide  the  destinies  of  his  company 
here  is  the  Pacific  departmental  manager. 

It  is  to  be  hoped  that  there  will  be  as  little 
friction  as  possible  in  underwriting  circles  in 
future  years,  so  that  the  business  can  continue 
to  grow  unhampered.  The  possibilities  in  this 
field,  from  a  fire  insurance  standpoint,  are  con- 
ceded to  be  very  good.  Co-operation  between 
company  managers  is  essential  to  the  good  and 
welfare  of  the  business.  If  this  is  practiced, 
the  fire  insurance  business  on  the  Pacific  Coast 
should  continue  to  flourish  ad  infinitum. 


[Page  Thirty 


„«  IS  DTJB  ON  THE  I-ASt  DA« 
rr^TpToF  25  CENTS 

WILL  BE  ^S^^^THE  DATE  ^UE-  JHE  P  ^^„ 

d;,y    and   to   *  •  __==-== 

OVERDUE. 


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LD21-l00m-'?.'3'^ 


500680 


UNIVERSITY  OF  CAUFORNIA  UBRARY 


